Merchant Cash Advance

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A merchant account has become a necessity for most businesses today, allowing the business to accept payments by credit and debit cards via card terminals at the point of sale and online payment gateways (not PayPal). Consumers expect to be able to pay by card, it’s considered a safe and convenient payment method. In 2016 Australians used cards to pay for 52% of goods and services, up from 26% in 2007.

Payment Methods that Australian's are Using

If you need access to additional funds to cover business expenses, and you already have a merchant account in place, a merchant cash advance may be a good option for you.

What is a merchant cash advance?

A merchant cash advance also known as an ‘MCA’ or ‘credit card receivable funding’, allows your business to borrow money based on your existing merchant account sales. The lender advances you a sum of money which you repay with a percentage of your future merchant sales (credit card and EFTPOS sales). It’s a quick and easy way to get a cash advance. It’s an alternative method of funding a small business, technically it’s not a loan; instead, the lender is purchasing your future transactions and advancing you payment against your future sales. A merchant cash advance is ideal for businesses that have a high turnover, but low cash on hand, such as retail shops, cafes and restaurants.

How does a merchant cash advance work?

If you’re approved (see the approval process below), you will immediately receive a lump sum of cash from the lender, usually by direct deposit into your bank account. You then pay back the amount of cash by authorising the lender to take a fixed percentage of your daily credit card and EFTPOS sales until the cash advance is paid back in full. This daily repayment happens automatically, you don’t have to physically make the daily payments to the lender. It’s also worth pointing out that the frequency of the repayments are usually five days a week, not seven (weekdays only). The percentage you pay back is known as the ‘holdback’ rate and can be anywhere between 5% and and 20%. Here’s a visual example of how it works…

How Merchant Cash Advance Repayments Work

What can the cash be used for?

You can use the cash for any business purpose. Many small business use their merchant cash advance for:

Buy inventory and stock

Purchasing stock

Buy equipment or machinery

Purchasing equipment



Increase working capital

Expansion and relocation

Advertising and Marketing


New employees

Hiring new staff

Buy a competitor out

Helping meet gaps in cash flow

How much can I borrow?

The amount of cash you can receive will depend on your merchant sales history and business finances. Most merchant cash advance lenders will advance anywhere up to 100% of your average monthly sales through your merchant account. Although each lender will have a minimum and maximum amount they will lend to you, (e.g. $5,000 to $300,000). A benefit of a merchant cash advance is they often come with a renewal feature. Once a certain amount has been paid off you can borrow again, before paying the full amount back. For example, if your MCA has a 50% renewal program, you’ll be eligible to renew for additional funding after your payback is 50% complete. You can renew multiple times – about 70% of merchants take advantage of this option.

How soon do I need to pay it back?

With a merchant cash advance, you’re paying back a fixed percentage of your daily card sales, therefore the actual amount you pay back each day will vary based on the amount you receive in payments each day. This is beneficial if you have a slow month. However, you will still need to agree on a term with the lender (usually between 3 to 12 months). If it includes a renew feature, you can negotiate the amount and term once you have paid back a certain amount.

Loan Repayment Example

Pro Tip 1: Use our Merchant Cash Advance Calculator to find out what the repayments might look like for your business.

Interest rate and fees

Instead of having an interest rate, a merchant cash advance has an agreed total payback amount. Let’s take a look at the example above: You want an advance of $30,000 and the merchant cash advance provider offers you a 12-month term with a total payback amount of $39,000. Remember, the frequency of the repayments is usually five days a week, at the holdback rate you negotiated. If the holdback rate was 15% and you daily card sales was $1385, the daily repayment would be $207.75 and it would take 188 days to pay back.

Other fees – Depending on the lender, there may be other fees such as a monthly account keeping fee, establishment/processing fee and a risk assessment fee. Here’s some examples of processing fees for an MCA:

Less than $10,000 $399
$10,000 to $19,999 $499
$20,000 to $49,999 $599
$50,000 or greater $699

A typical risk assessment fee can be up to 3% of the approved advance. So if your advance was $30,000 and the fee was 3%, the cost would be $900 on top of processing fees.


The requirements vary from lender to lender, but in general, requirements for a MCA are much more lenient than a traditional loan. You don’t have to have perfect credit score to get approved for a merchant cash advance as the lender is taking money from your sales BEFORE you get paid. Here’s a list of requirements and documents you can expect to provide:

  • Been in business for a minimum amount of time (usually 6 months)
  • Bank statements showing that you have regular deposits (usually 8 or more)
  • Photo ID
  • Credit check
  • Landlord reference/agent number
  • If you own the premises, rates notice and mortgage statements

Unsecured – A merchant cash advance is ultimately an unsecured business loan meaning; you do not need to tie up any collateral (property and other assets) as security; instead, your future sales act as security. Minimum paperwork – In most cases, you won’t even need to provide the usual loan application paperwork such as your business financials, tax returns and BASs. Though this will depend on the amount you borrow and the lender.

Where do I get a Merchant Cash Advance from?

You can get a merchant cash advance from companies and providers that specialise in providing MCA facilities. At the time of writing, banks do not offer MCA facilities. It’s quick and easy to apply and the application can be completed online.

How do I get a merchant cash advance?

Firstly, you need to already have a merchant account in place. The application process can be done entirely online – complete application and upload supporting documents.

  • Work out how much of a cash advance your business actually needs.
  • Have your merchant financials at hand, such as your average monthly merchant sales and number of merchant deposits.
  • Apply online with a company or provider that offers MCAs.
  • Wait to be contacted to discuss your application. It’s usually a quick approval - typically within 24 hours
  • If approved, the funds will be accessible to your business within 1-2 days.

Pro and Cons

  • Fast - within days, compared to months for a traditional loan with a bank
  • Much easier to qualify, compared to other loans
  • Simple process - little paperwork involved
  • No collateral required
  • No minimum payments - pay a fixed percentage of your sales
  • Can be used for any almost any purpose
  • Higher cost than a traditional business term loan
  • Only available to merchants
  • Often used to try and solve ongoing cash flow issues, but because it’s structured as short-term solution, it usually does not provide long-term benefits
  • Selling future sales can be risky, if you do not get the future sales, you still owe the money

How does a Merchant Cash Advance compare to other loans?

Loan Type Requirements Time to Funding & Amount Avg. Interest Rate & Costs Repayment Terms How It Works
Secured Business Term Loan Credit and ID Check. Bank statements. 12+ months in business. Business financials. Collateral in case you default, such as your home, car or other assets. More paperwork. Slow (weeks or months)
$50k - $10m
2.97% - 9.83% 1-10 Years A term loan is a loan that is repaid in regular payments over an agreed period of time. Usually for a specific purpose. You need secure the loan with collateral such as property.
Unsecured Business Term Loan Credit and ID check. Bank statements. 3+ months in business. Less paperwork. 100% online. As fast as same-day
$5k - $250k
2.97% - 12.83% 3-12 Months 3-12 Months Same as above, but no collateral required.
Merchant Cash Advance Credit and ID Check. Minimal paperwork. Very lenient. You don’t need a perfect credit score. 6+ months in business. Bank statements showing regular deposits. No collateral required. Fast (1-2 days)
$5k - $250k
usually ~20% 1-12 Months
An agreed % of your merchant sales is repaid daily (weekdays only).
Lump sum Advance in return for a % of daily credit card and EFTPOS sales.
Business Line Of Credit (LOC) Credit and ID Check. Bank statements showing a good track record and that you can afford to borrow. Good credit score. Time in business of 6+ months. No collateral required. Fast (1-2 days)
$5k - $250k
5.07% - 12.45%
Application fee: 0.5% - 3% of credit limit. Monthly service fee: varies
3-30 Months
Revolving LOC has no term, once you repay you can draw down again.
Agreed credit limit is made available to drawn down upon. Only pay interest on the amount you draw down.

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