A merchant cash advance (MCA) is one of the quickest and easiest ways for a small business to get money, especially when they can’t get a bank loan or other traditional financing. But business owners need to know that MCAs come with higher costs, different ways to pay them back, and certain situations in which they should be used.
This guide tells you everything you need to know about merchant cash advances, including what they are, how they work, how much they cost, how to figure out how much you owe, when they make sense, and when they don’t. You’ll also find out how ICG Funding helps business owners find responsible MCA options and stay away from lenders who are out to get them.
You will know by the end of this guide:
- What a merchant cash advance really is
- How MCAs work
- How to pay back (daily or weekly)
- What are factor rates?
- The real cost of MCAs
- When it’s a good idea to get an MCA
- When to stay away from an MCA
- What lenders want
- How to get in
- How to apply for ICG Funding
Let’s take everything apart.
What Is a Cash Advance for Merchants?
A merchant cash advance is NOT a loan.
Instead, it’s a way to buy future business income.
You get a lump sum payment up front, and the MCA provider collects payment through:
- A part of your daily income, or
- ACH withdrawals that happen every day or week
In short:
The lender gives you money now in exchange for a part of your future sales.
People like MCAs because they:
- Quickly give your approval
- Need little paperwork
- Take less credit
- Don’t base approval on credit; base it on revenue
They are one of the funding products with the highest approval rates on the market.
How a Merchant Cash Advance Works (Step by Step)
Here’s the simplest way to break it down:
- You get a lump sum payment up front.
For example, a $30,000 advance. - The lender uses a factor rate.
For example, the factor rate is 1.30. - You have to pay back a total of “payback amount.”
The total payback is $39,000, which is $30,000 times 1.30. - Repayment happens on its own.
Either:- Percentage of credit card sales each day
- Payments that stay the same every day or week
- Payments keep coming in until the full balance is paid.
There is no interest rate, no schedule for paying off the loan, and no set term.
Payments simply continue until the full amount has been paid back.
What Is the MCA Factor Rate?
Factor rates are the way that MCA costs are figured out.
The risk level usually determines the range, which is between 1.18 and 1.50.
For example
Advance: $40,000
Factor rate: 1.35
The total amount paid back is $40,000 × 1.35 = $54,000.
The cost is the difference between the amount paid in advance and the total amount paid back.
How Much Does a Merchant Cash Advance Really Cost?
Many business owners don’t realize how much MCAs really cost because they use factor rates instead of interest rates.
The average cost of an MCA is:
| Credit Risk | Normal Factor Rate | Cost Level |
|---|---|---|
| Low risk | 1.18 to 1.28 | Low |
| Medium risk | 1.29 to 1.40 | Medium |
| High risk | 1.41 to 1.50+ | High |
APR that works:
MCAs can have APR equivalents anywhere from 25% to 100%+, depending on:
- Rate of factor
- How often you pay
- How fast you can pay back
How to Pay Back: Daily or Weekly Payments
There are two kinds of repayment plans:
1. Daily ACH or Split-Funding (Most Common)
- Every business day, payments go out
- Can be based on a fixed amount or a percentage
- Automatically change with income (for split-funding)
Best for:
- Businesses that make money every day
- Stores that sell things
- Places to eat
- Online shopping
2. ACH Every Week
- Less often
- Managing cash flow is easier
- Bigger payments
Best for:
- B2B businesses
- People who work for contractors
- Companies that provide services
What You Need to Do to Get an MCA
MCAs have some of the easiest requirements for getting approved in the business.
Common minimums:
- Time in business: 3 to 6 months
- Monthly revenue: $8,000–$12,000
- Credit score: 500 or higher
- 3 months of bank statements
- Few overdrafts or NSFs
Lenders care more about cash flow than credit because repayment is based on income.
What Lenders Look For
Lenders look at your:
- Balances in the bank every day
- How often you deposit
- Average monthly income
- Overdraft and NSF history
- Payments on existing debt
- Seasonality
- Type of business
If your statements show steady deposits and high revenue, you have a good chance of getting approved, even if you have bad credit.
How Much Can You Get With an MCA?
Common amounts for advances:
- $5,000–$30,000 for businesses that make $10,000–$25,000 a month
- $20,000–$60,000 for businesses making $25,000 to $50,000 a month
- $30,000 to $150,000 for companies making $50,000 to $150,000 a month
- $100,000 to $500,000 or more for businesses that make $150,000 or more
MCA limits are based on how much money you make each month, not on your credit score.
When Does a Merchant Cash Advance Make Sense?
MCAs aren’t always the best choice, but they can be very helpful when used correctly.
MCAs make sense when you:
✔ Need money right away
MCAs can fund in 24–48 hours.
✔ Have less credit
They accept scores that banks would turn down.
✔ Make a lot of money
Daily payments make it easy to pay back.
✔ Have a chance in the short term
For example:
- Buying stock at a discount
- Getting a new contract
- Opportunities that come up at certain times of the year
- Pushes for marketing
- Repairs that need to be done right away
✔ Need cash when banks say no
More than 70% of small business applicants are turned down by banks.
When You Should NOT Get a Merchant Cash Advance
You shouldn’t use MCAs when:
- You need money for a long time
- Your margins are small
- Your income isn’t steady
- You already have more than one MCA
- You cannot handle daily or weekly payments
- The money doesn’t bring in a lot of money
MCAs are not a way to get long-term financing; they are a short-term tool.
Merchant Cash Advances: The Good and the Bad
Good things
- Extremely fast funding
- Very high rates of approval
- Low credit is okay
- Little paperwork
- No security
- Flexible approvals based on revenue
Disadvantages
- More expensive than regular loans
- Payments every day or week
- Risk of taking on too much debt
- Not good for long-term needs
Other Choices Besides MCAs (Sometimes Better Ones)
If you qualify, other options might be less expensive:
✔ Line of credit for business
Best for working capital that comes back.
✔ Loan for working capital
Terms that are structured and lower cost.
✔ Loan from the SBA
Lowest rates, but slow and a lot of paperwork.
✔ Credit that is based on income
Costs less but gets the same number of approvals.
✔ A loan for a set amount of time
Payments that are easy to plan for and a set cost.
Based on your cash flow, credit, and business needs, ICG Funding can help you figure out which is best.
How ICG Funding Helps You Get an MCA the Right Way
ICG Funding’s main job is to help small businesses avoid predatory lenders and find MCA options that are:
- Clear
- Not too expensive
- Well-structured
- Good for your level of income
- Matched to how your cash flow works
ICG Funding helps businesses:
- Look at different MCA offers
- Rates for lower factors
- Get better deals
- Get more money approved
- Stay away from hidden fees
- Make the repayment plan better
- Consolidate or refinance MCAs
ICG Funding works with:
- Top MCA lenders
- Lenders in the middle
- Lenders with a lot of risk
- Providers of funding based on revenue
This makes sure that every business gets an offer that fits their needs, not a product that works for everyone.
How to Get a Merchant Cash Advance from ICG Funding
It’s easy to do:
Step 1: Send in your application
Step 2: Send in bank statements from the last 3 to 6 months
Step 3: Get several MCA offers
Step 4: Look at the rates and terms of the factors
Step 5: Pick the best choice
Step 6: Get funded within 24–48 hours
Quick. Simple. No long paperwork.
Last Thoughts
When used wisely, a merchant cash advance can be a very useful tool. It gives you quick access to cash, flexible approval, and immediate funding, which is great when your credit is bad or banks say no. But MCAs should only be used when they really make sense because they cost more and require payments more often.
ICG Funding gives you access to responsible MCA providers, better prices, clear terms, and expert help to help you choose the best option for your business.
