Merchant Cash Advance (MCA)

Category: finance

A financing arrangement where a business sells a portion of its future credit card sales in exchange for immediate cash.

MCAs are not technically loans; they are asset sales. The advance is repaid via an automated daily percentage deduction from the merchant's point-of-sale credit card volume. While fast and low-barrier, MCAs carry exceptionally high effective APRs (often 50% to 100%+).

Common Examples

• The retail shop turned to a merchant cash advance to cover emergency inventory needs, accepting a daily automated revenue deduction.
• The finance consultant warned against using an MCA due to the high factor rates that can quickly drain a business’s net margins.