A merchant cash advance (MCA) gives you a lump sum that you repay as a share of your future card takings, plus a fixed fee. It's priced on a factor rate, not an interest rate, and business MCAs are usually unregulated.
How it works
- You receive a lump sum based on your card sales history.
- You repay a fixed total: the advance multiplied by the factor rate, for example 1.2 times what you borrowed.
- Repayments come out of your card takings as a set percentage, so you pay more on busy days and less on quiet ones.
Why the cost can surprise you
A factor rate isn't an interest rate. Because the fee is fixed, the quicker you repay, the higher the effective annual cost. An MCA repaid over a few busy months can cost far more than its factor rate suggests.
When it can make sense
- your takings are mainly by card and quite seasonal
- you need money quickly and don't qualify for other finance
When a loan is usually cheaper
If you can get a term loan or an overdraft, they usually cost less for the same amount, and they're easier to compare. See What's the difference between a term loan and a revolving credit facility?.
Comparing offers
Ask for the total amount you'll repay, and compare it with other options over the same period. See How do I compare the business finance offers you find?.
For more, read Merchant cash advance: what it costs and when a loan is cheaper.
Last reviewed: 8 October 2026