How a merchant cash advance works
A provider gives you a lump sum today. In return, you repay a fixed total through a holdback — a percentage of your daily card or bank deposits — until the balance is paid. When sales are slow, payments shrink; when sales are strong, you repay faster.
Understanding the factor rate
If you receive $50,000 with a factor rate of 1.25, you repay $62,500. The cost is fixed regardless of how quickly you repay, so an MCA repaid in four months can have a much higher effective annual cost than one repaid in twelve. See our explanation of factor rates.
When an MCA makes sense
A Kacu merchant cash advance is structured transparently so you know the total payback upfront.
- You need cash in a day or two for a clear, short-term opportunity
- Your business has strong card sales but limited credit history
- The return on the money clearly exceeds the fixed cost
The risk of stacking
Taking a second or third advance before the first is repaid — called stacking — can quickly overwhelm cash flow. If this has already happened, debt consolidation can combine the advances into one manageable payment. Our guide on how to get out of MCA debt walks through your options.
Frequently asked questions
Is a merchant cash advance a loan?
Technically no. An MCA is a purchase of future receivables, which is why it uses a factor rate and holdback instead of an interest rate and fixed payment.
How fast can I get a merchant cash advance?
Often within 24 hours of approval, which makes it one of the fastest forms of business funding.