The most crucial part of any business is ensuring sufficient cash flow, with the help of which, an entrepreneur can meet its goals, cover expenses and eventually expand. Therefore, entrepreneurs, especially the small ones, opt for numerous unconventional business funding, available these days, to kick start their businesses, recover losses or accelerate the existing growth graph. Unlike traditional bank loans that demand collateral, a good credit score and extensive paperwork, these funding options only require the balanced sheets and the businesss profit statements of the last 6 months, which can prove the repaying capacity of the borrower. One such option is Merchant Cash Advance or MCA, which is an alternative financing option for small businesses, providing cash upfront in exchange for a percentage of the businesss credit card sales. However, one needs to thoroughly go through the fee structure and payment schedule before deciding on an MCA lender.

A popular funding option for small businesses, MCA is a quick way of getting cash with high approval rates. Many MCA companies offer same-day or next-day funding. Hence, it is ideal for situations when cash gets tight and a lump sum is imperative to continue trading. As merchant cash advances depend on credit card sales, they are ideal for businesses like restaurants or retail stores, which have a large, regular volume of credit card and debit card transactions. In the case of an MCA, the lender will charge a retrieval rate, which is basically a fixed rate percentage of the borrowers credit card sales. The borrower will have to continue paying this daily percentage till the entire cash advance is repaid. The fees are decided by the factor rate, a number that states the amount the cash advance will cost the borrower.

The two key rates: retrieval rates and factor rates along with the advance amount and the borrowers credit card revenue decides the repayment term.

The advance amount, which is expected to get approved, immensely depends on the credit card sales of the business. Most MCA lenders cap an advance of 250% of the businesss monthly credit card sales. For example, on making $20,000 in sales each month, the borrower can expect an advance of $50,000.

      Rates and fee structure:

      After getting an MCA approved, one needs to agree to repay the lender the full cost of the business cash advance along with the providers fees. Due to the factor rate, a borrower will be clear on the full cost of the advance from the initial phase. The factor rate comprises the cost of the advance as well as the borrowers fees. But, what needs to be noted is that a factor rate is in no way similar to an interest rate. Interest gets accrued over time, but factor rate doesnt, a factor rate is a flat fee. It often falls between 1.2 and 1.5. One can multiply the factoring fee by the advance amount, to calculate the total cost.


      When the advance amount is $ 50,000 and the factor rate is 1.5, the total repayment amount comes up to $ 60,000($ 50,000 x 1.2) in principal and $10,000 in fees.

      Retrieval rates are a fixed percentage of the borrowers credit card revenue that goes to the lender for repayment purposes. The retrieval rate depends on the businesss projected revenue and the advance amount. Often, a retrieval rate between 10% to 20% of the borrowers daily revenue is expected. Most of the time, the lender takes their percentage either by offering a new credit card reader or helping the borrower program the existing one.


      There is no fixed term when it comes to repayment on a merchant line of credit. One needs to pay the retrieval rate until the advance and the factor rate fees are repaid.


      When a borrower needs to repay an amount of $ 10,000(including all fees), and the lender sets a retrieval rate of 10% of the borrowers daily revenue($ 500 approximately), the borrower has to pay around $50 per day. This shows that the borrower ends up with a term of 200 days or a little less than seven months to repay the $ 10,000.

      Mostly, a lender chooses a retrieval date that will make sure the borrower needs to repay the advance and factor rate between six months to one year. However, as the repayment depends on the daily revenue, the actual time frame is often unpredictable.


      MCAs are quite attractive for small business owners, who are not eligible for other forms of financing and have numerous credit card transactions. The primary reason behind the popularity of MCA is the low credit requirements, fast funding turnaround and no necessity of collateral. To know more about MCA and apply for it, you can visit ZEROPOINT Finance by clicking