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Merchant Cash Advance For Business Owners

As an established business or a startup, you may not always have the funds to get your business over a hurdle.

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As an established business or a startup, you may not always have the funds to get your business over a hurdle.

Business Sign Up

The costs of starting a business can accumulate quickly, which can easily overwhelm any kind of profit you are making. When you want to expand or fix a short-term financial issue, your current resources may not always be able to handle the expenses of growth. This is where merchant cash advances come in.

A merchant cash advance is for you and your business if you need capital now. Companies that utilize this financing option may be financially strapped, they may not have the finances to fund the required growth they need, or they do not qualify for traditional lending. If cash is managed responsibly and utilized wisely, MCAs can propel your business forward.

What is a Merchant Cash Advance?

Merchant cash advances for businesses are simple and straightforward. It is a lump-sum amount of money lent to a business in exchange for an established percentage of future sales of any kind. It is a short-term deal with quick payback terms, but a relatively easy and rapid means of upfront cash.

This solution is similar to a short-term loan; however, an MCA is in no way a loan, and is not structured as such. Essentially, the borrower purchases cash with an asset (the asset being a percentage of their future credit card sales). Merchant cash advances are also more flexible and easier to receive than short-term loans from traditional lenders.

How Merchant Cash Advances for Businesses Work

MCAs are structured in 2 ways. Either a lump sum is given in exchange for a portion of future sales or the lent capital is paid off through daily or weekly fixed remitted debits. The latter option’s withdrawals are known as Automated Clearing House withdrawals or ACH.

The payments are dependent on the factor rate, amount of interest that you will be charged, which is calculated based on the risk factor of your business. It is typical of MCAs to charge a factor rate of 1.2 to 1.5. Calculate your total repayment expense by multiplying the cash advance by the factor rate.

The repayment for future sales functions differently. The percentage of sales is calculated upon
projected monthly revenue, but payments will change if sales are not meeting projections.

How Business Owners Apply for Merchant Cash Advances

What is Not Required

Rather than making a decision to grant the MCA based on a credit score, the decision will be heavily weighted on the volume of the business’s monthly deposits. Most MCAs will require a credit score of at least 550. While bank loans require collateral to secure the loan, MCAs don’t. This frees up the restrictions on how you spend your capital. Additionally, bank lenders typically require 5 years of business history. With these cash advances, businesses can sign up with as little as 6 months.

Step One – Decide if an MCA is an appropriate financing option

It may be right for you if you own a young business, do not have the best credit, need cash quickly to grow or maintain the business, or you need to solve a short-term financial problem.

Step Two – The Application Process

Fill out an application online or over the phone. An application will require basic business information such as: how much you are requesting, the primary use for the funds, if you have existing loans, how many owners are in the business, social security number, business tax ID, and in some cases, bank statements.

An MCA funding company will also perform an overall review of your business which may include corporate structure, business model, and industry analysis. The amount of money your business will qualify for depends on historical sales volume.

Step Three – Approval

Depending on the company and the amount of information that needs review, the application can be approved in a few hours to several days.

Step Five – Contract Review

Once approved, you will review the details of the contract. The provider will detail how much you are expected to repay how often. It will also provide penalties if the advance is not repaid and regulations of the transaction.

Step Six – Cash Flow

Once you agree with the details of the contract by signing it, funds will be transferred into your bank within 24 hours.

Note: Supervest is not a fund and does not manage money. We connect accredited investors to MCA funding companies to help fuel small business growth. We also connect businesses in need of additional cash to MCA funding companies.

Supervest, Inc.


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