Fast funding when you need it most. Get same-day merchant cash advances based on your franchise's daily sales. Understand the true costs and explore better alternatives.
Warning: MCAs are expensive. Consider traditional loans first - rates as low as 9.5% vs 25-50% for MCAs.
Calculate the true cost of merchant cash advances and compare with traditional financing
Calculate the true cost of merchant cash advances and compare with traditional financing
Amount you receive upfront
Typical range: 1.1 - 1.5 (1.3 = pay back $1.30 for every $1.00)
Percentage of daily sales deducted
Your franchise's average daily credit card sales
How long you expect to take to repay
Before taking an expensive MCA, explore traditional financing options that could save you thousands. Connect with franchise financing specialists who can help you find better alternatives.
MCA providers analyze your franchise's credit card and bank deposit history, typically looking at 3-6 months of sales data.
You receive a lump sum (typically 1-4 months of average sales) deposited directly into your business account.
A fixed percentage (10-20%) of your daily credit card sales is automatically deducted until the advance plus fees are repaid.
Repayment continues until the total amount (advance + factor rate fees) is fully collected, typically 3-18 months.
MCAs use factor rates (1.1 to 1.5) instead of interest rates. A factor rate of 1.3 means you pay back $1.30 for every $1.00 advanced.
The daily percentage of sales deducted (typically 10-20%). Higher holdbacks mean faster repayment but more cash flow strain.
How quickly you repay affects the APR. Faster repayment = higher APR. A 6-month repayment at 1.3 factor = ~60% APR.
Most MCAs require personal guarantees from franchise owners, making you personally liable for repayment.
$100K advance at 1.3 factor rate:
• Total repayment: $130,000
• If repaid in 6 months: ~60% APR
• If repaid in 12 months: ~30% APR
• Daily payment: $650-$1,300 depending on sales
Same-day to 48-hour funding when you need emergency capital
Approval based on sales, not just credit scores
No equipment or real estate needed as security
Payments adjust with your daily sales volume
Payments fluctuate with business performance
Simple application with bank statements and processing statements
25-50% APR equivalent, much higher than traditional loans
Constant cash flow drain can strain operations
Franchise owners are personally liable for repayment
High costs can lead to needing additional advances
Fewer consumer protections than traditional lending
May restrict other financing or business decisions
Interest Rates: 9.5% - 15% APR
Terms: 2-7 years
Approval: 1-2 weeks
Best For: Established franchises with good credit
Save 50-75% vs MCAs
Interest Rates: 12% - 20% APR
Terms: Revolving credit
Approval: 3-7 days
Best For: Seasonal cash flow needs
Save 30-60% vs MCAs
Interest Rates: 9.5% - 12.5% APR
Terms: 5-25 years
Approval: 30-90 days
Best For: Large amounts, long-term needs
Save 60-80% vs MCAs
Interest Rates: 9.5% - 14.5% APR
Terms: 2-7 years
Approval: 1-3 days
Best For: Equipment purchases
Save 40-70% vs MCAs
Interest Rates: 9.5% - 15% APR
Terms: 5-15 years
Approval: 2-3 weeks
Best For: Established franchises with equity
Save 50-75% vs MCAs
Interest Rates: 15% - 25% APR
Terms: 6-24 months
Approval: 3-7 days
Best For: Growing franchises with strong revenue
Save 20-40% vs MCAs
MCAs provide upfront cash in exchange for a percentage of your daily credit card sales. The MCA company analyzes your franchise's sales history and advances a lump sum (typically 1-4 months of average sales). They then collect a fixed percentage (10-20%) of your daily credit card receipts until the advance plus fees are fully repaid.
Factor rates (typically 1.1 to 1.5) represent the total cost of the advance. A 1.3 factor rate means you pay $1.30 for every $1.00 advanced. Unlike interest rates, factor rates are fixed regardless of repayment time. However, faster repayment results in higher APR equivalents - a 6-month repayment at 1.3 factor equals approximately 60% APR.
MCAs are known for speed - many providers offer same-day to 48-hour funding. The application requires minimal documentation (bank statements, processing statements, basic business info). This speed makes MCAs attractive for emergency situations, equipment breakdowns, or urgent opportunities, despite the high cost.
MCAs typically accept lower credit scores than traditional loans - often as low as 500 personal credit score. Approval is primarily based on your franchise's credit card sales volume and consistency rather than credit scores. However, better credit scores can result in better factor rates and terms.
MCAs are expensive (25-50% APR equivalent) because they're considered high-risk, short-term financing. The daily collection model, minimal underwriting, fast funding, and lack of collateral requirements all contribute to higher costs. MCA providers also face higher default rates, which they offset with higher pricing.
Yes, daily payments can significantly strain cash flow. Taking 10-20% of daily sales means less money for payroll, inventory, rent, and other expenses. Many franchise owners find themselves in a cycle where they need additional advances to cover operating expenses, leading to multiple MCAs and even higher costs.
Most MCAs have provisions for sales fluctuations, but prolonged low sales can trigger default. MCA companies may freeze bank accounts, pursue personal guarantees, or take legal action. Some offer "reconciliation" periods where payments pause temporarily, but interest continues accruing. It's crucial to have contingency plans for seasonal or economic downturns.
While possible, multiple MCAs are extremely dangerous and expensive. Each advance takes a percentage of daily sales, quickly consuming cash flow. Multiple MCAs often indicate financial distress and can lead to a debt spiral. If you have multiple MCAs, debt consolidation into a traditional loan can save thousands monthly.
The best exit strategy is debt consolidation with a traditional business loan at much lower rates (9.5-15% vs 25-50%). This requires stable cash flow and decent credit. Franchise equity loans, SBA loans, or business term loans can pay off MCAs and reduce monthly payments by 30-60%. Work with lenders experienced in MCA consolidation.
Better alternatives include business lines of credit (12-20% APR), equipment financing for specific purchases (9.5-14.5% APR), short-term business loans (15-25% APR), or franchise equity loans (9.5-15% APR). While these take longer to approve, the savings are substantial. Consider establishing credit lines before emergencies occur.
Generally no - MCAs are too expensive for planned investments like expansion or equipment. Use equipment financing (9.5-14.5% APR) for equipment purchases or business expansion loans (9.5-15.5% APR) for growth. Reserve MCAs only for true emergencies when traditional financing isn't available and the cost of not acting exceeds the MCA cost.
Research lenders thoroughly, avoid unsolicited offers, read all terms carefully, and understand the true APR cost. Avoid lenders requiring upfront fees, offering advances above 150% of monthly sales, or using aggressive collection tactics. Get multiple quotes and consider working with brokers who specialize in franchise financing and can offer better alternatives.