Merchant cash advance
A lump sum now in exchange for a share of your future sales, usually collected by daily or weekly withdrawals from your bank account until a fixed total is repaid. Fast, but one of the most expensive ways to raise money.
L4 · Expensive or fastRegulation dependsLast checked: October 17, 2026Something wrong or out of date?
Cost band
L4
Expensive or fast
Speed
Days
Amount
Varies
Term
Until the fixed total is repaid, which depends on your sales
Ownership
No shares given up
Security
- Personal guarantee likely
How it works
A merchant cash advance (MCA) provider pays you a lump sum up front. In return you agree to hand over a percentage of your future sales or revenue until you have paid a fixed total, which is more than you received. Payments are typically taken as daily withdrawals from the business's bank account. Some contracts take a fixed amount each day or week and adjust it later to match your sales (a "true-up" or reconciliation).
Providers usually describe an MCA as a purchase of your future sales rather than a loan. Federal Truth in Lending rules do not cover business finance either way, but a growing number of states require providers to disclose the full cost before you sign; see the state rules below.
Read the contract for:
- The total you will repay and how much you actually receive after fees are taken out.
- The payment: the percentage of sales, or the fixed daily or weekly amount, and how it changes if sales fall.
- A personal guarantee: the Federal Trade Commission has sued providers whose ads promised no personal guarantee while their contracts required one.
- A confession of judgment: a clause that lets the provider get a court judgment against you without a lawsuit if it says you have defaulted. Some states ban or limit these.
- Security: some contracts give the provider a security interest in business assets.
Taking a second advance to keep up with the first (sometimes called stacking) adds a second set of withdrawals from the same sales.
Upsides and downsides
Upsides
- Fast to arrange
- When payments are a percentage of sales, they fall when sales fall
Downsides
- Usually much more expensive than bank, SBA or community lending
- Daily or weekly withdrawals take cash before you can use it
- Contracts can include personal guarantees and confessions of judgment
- Outside the states with disclosure laws, the full cost can be hard to work out and compare
Risks
- Withdrawals can continue at the same level when sales drop, unless the contract adjusts them
- Taking another advance to repay the first can lead to a debt spiral
- With a personal guarantee or a confession of judgment, your personal assets can be at risk
What it costs
- How it is priced
- A fixed total to repay, set when you sign, collected as a share of sales or as fixed daily or weekly withdrawals
- Costs that are easy to miss
- Fees taken out of the advance, so you receive less than the headline amount
- Repaying early may not reduce what you owe, because the total is fixed when you sign
- The yearly cost (APR) can be very high when the advance is repaid in a few months
Based on your recent sales and bank statements.
Have an offer? Cost of a merchant cash advance or revenue-based finance: work out the estimated APR and total cost
Does it fit?
Could fit when
- You need money within days for a short-term gap
- A bank has turned you down, and customers pay you by card or at the time of sale
Unlikely to fit when
- A bank, SBA or community loan, line of credit or invoice finance could cover the need
- The business is making a loss
- Your margins are thin
- You are already repaying a merchant cash advance, and a second one would take a second share of the same sales
Who can use it
- Business types: Sole proprietorship, Partnership, LLC, S corporation, C corporation, Benefit corporation, Cooperative
- Needs sales (revenue)
- Steady card or bank deposits that providers can check on your bank statements
Am I ready?
What a provider is likely to ask for. Tick what you have. Your ticks stay in this browser and nothing is stored. Checklist for all alternative and fast debt
Ready
0%
0 of 3 ticked
Next to prepare
- Bank statements
- True cost worked out
- Contract checked
Regulation and protections
Regulators: Federal Trade Commission (FTC); State lending and financial regulators.
Who runs it: Private providers, nationwide.
Federal Truth in Lending rules do not cover business finance. The FTC Act bans unfair or deceptive practices, and the FTC has sued providers for misleading terms, unauthorized withdrawals and misuse of confessions of judgment. Protections depend on your state; see below.
Rules that differ by state
- California: A provider that is not a bank or credit union must give you a disclosure before you sign an offer of $500,000 or less, showing the funds you get, the total dollar cost, the estimated term, the payments, the prepayment rules and an estimated APR, and must get your signature on it. Since January 1, 2026, a provider that quotes a price during an application must also state the APR. State rules in force since October 1, 2023 ban unfair, deceptive or abusive practices in commercial financing, including merchant cash advances, to small businesses, farms and nonprofits. (California Financial Code, Division 9.5: Commercial Financing Disclosures (sections 22800 to 22807); DFPI: commercial financing disclosure regulations effective December 9, 2022; DFPI: Advisory to small businesses on merchant cash advances (April 14, 2025))
- New York: A provider that is not a bank or other financial institution must disclose, when it makes a specific offer of sales-based financing of $2.5 million or less, the amount you get, the finance charge and an estimated APR calculated under federal Truth in Lending rules from your projected sales. A confession of judgment can be filed only in a New York county where the business is based. (New York Financial Services Law section 802: exemptions; New York Financial Services Law section 803: sales-based financing disclosures; New York Civil Practice Law and Rules section 3218: judgment by confession)
- Virginia: Providers and brokers of sales-based financing must register with the State Corporation Commission. For a business based in Virginia, a provider must disclose, with each offer of $500,000 or less, the amount, the finance charge, the total repayment, the estimated number of payments, other fees, any collateral or security interest, and any payment to a broker. Confessions of judgment are not allowed, and court cases must be brought in Virginia. (Code of Virginia, Chapter 22.1: Sales-Based Financing Providers (sections 6.2-2228 to 6.2-2238))
- Utah: A provider that makes more than five commercial financing deals a year in Utah must register with the state and, before you sign a deal of $1 million or less, disclose the funds you get, the total you will pay, the total dollar cost, the payments (or the estimated first payment, if payments vary) and any prepayment costs. No APR is required. (Utah Code Title 7, Chapter 27: Commercial Financing Registration and Disclosure Act)
- Florida: For deals of $500,000 or less made since January 1, 2024, a provider that is not a federally insured bank or credit union must disclose in writing, at or before signing, the funds provided, the amount actually paid out, the total you will pay, the total dollar cost, how payments are worked out and any prepayment costs. No APR is required. (Florida Statutes, chapter 559, part XIII: Florida Commercial Financing Disclosure Law (559.961 to 559.9615))
- Texas: Since September 1, 2025, providers and brokers of commercial sales-based financing must register with the Office of Consumer Credit Commissioner; those already in business then have until December 31, 2026. Offers of less than $1 million need cost and payment disclosures that you sign. Confessions of judgment are void, and a provider can set up automatic withdrawals from your bank account only if it holds a first-priority security interest in that account. (Texas HB 700 (2025), enrolled: Finance Code Chapter 398, commercial sales-based financing)
- Georgia, Kansas: Since January 1, 2024 in Georgia and July 1, 2024 in Kansas, a provider that makes more than five commercial financing deals a year in the state must disclose, before or when you sign an advance of $500,000 or less, the funds provided, the amount actually paid out, the total you will pay, the total dollar cost, the payments and any prepayment costs. No APR is required. The law covers purchases of a business's receivables as well as loans. Banks and credit unions, and financing secured by real property, are not covered. Brokers may not charge you an upfront fee. The state attorney general enforces the law; it gives you no right to sue. (Georgia SB 90 (2023), as passed (Act 78): commercial financing disclosures, O.C.G.A. 10-1-393.18; Georgia General Assembly: SB 90 (2023-2024 session), status history (Act 78, effective January 1, 2024); Kansas Statutes 75-783: Commercial Financing Disclosure Act, definitions (2024); Kansas Statutes 75-784: required disclosures (2024); Kansas Statutes 75-785 to 75-787: exceptions, brokers and penalties (2024))
- Missouri: A provider that makes more than five commercial financing deals a year with Missouri businesses must disclose, at or before signing an advance of $500,000 or less, the funds provided, the amount actually paid out, the total you will pay, the total dollar cost, the payments and any prepayment costs. No APR is required. The law covers purchases of a business's receivables, including card receivables, as well as loans. Banks and credit unions, financing secured by real property, and leases are not covered. Brokers must register with the Division of Finance and hold a $10,000 bond. The law's start date was February 28, 2025, unless the Division chose to make rules first; the Division publishes the registration form under it. The attorney general enforces the law; it gives you no right to sue. (Revised Statutes of Missouri 427.300: Commercial Financing Disclosure Law; Missouri Division of Finance: consumer credit licensing (commercial financing registration and bond forms))
- Connecticut: Since July 1, 2024, a provider of sales-based financing of $250,000 or less (repaid as a share of your sales or revenue, or by fixed payments adjusted to a share of sales) must give you, with each specific offer, a disclosure in the state's format showing the amount, the amount paid out, the finance charge, the total repayment, the estimated term, the payments, other fees, prepayment charges, any collateral and any payment to a broker, and get your signature on it. No APR is required. Providers and brokers must register with the Department of Banking. An offer cannot be withdrawn or changed until midnight on the third day, except after underwriting checks or at your request, and the contract cannot waive your right to notice and a court hearing before the provider seizes assets. Banks and credit unions are exempt. (Connecticut General Statutes, chapter 669, part XVI: commercial financing (sections 36a-861 to 36a-872); Connecticut Department of Banking: guidance on Public Act 23-201 (June 10, 2024, updated August 1, 2024))
Types of provider: Specialist merchant cash advance providers; Online lenders and finance companies; Brokers, who arrange advances for a fee (registration is required in some states).
Also consider
What has changed
No changes since this page was published. It was last checked against its sources on October 17, 2026.
Sources
- FTC: court order bans a merchant cash advance provider and its owner from the industry (June 6, 2022) · checked October 17, 2026
- FTC Business Blog: Looking for small business financing? Read this first (June 10, 2020) · checked October 17, 2026
- DFPI: Advisory to small businesses on merchant cash advances (April 14, 2025) · checked October 17, 2026
- 12 CFR 1026.3 (Regulation Z): exempt transactions, including business credit · checked October 17, 2026
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