Merchant Cash Advance

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Definition

What is it: Merchant Cash Advance (MCA) is an alternative lending option often used as a last line of defense for business owners in a cash flow crisis. Unlike traditional loans, it uses factor rates rather than interest rates to determine total repayment costs.

What is it used for: It is used by business owners seeking working capital who may no longer qualify for traditional bank loans. Repayment is typically structured through daily automatic withdrawals from the business bank account.

What it is not: It is not a traditional loan and does not use amortized interest rates where payments decrease as the principal is paid down.

Coverage

  • Attributes: 6
  • Synonyms: 2
  • Related entities: 2
  • Sources: 1

Identity

Entity ID
https://llms.secondwindconsultants.com/en/mca-factor-rates-vs-apr/facts/#entity
Entity type
Service
Canonical name
Merchant Cash Advance
Language
en
Topic
Mca Factor Rates Vs Apr

Attributes

Key Facts
The interest rate is the cost paid each year to borrow money, expressed as a percentage that does not include fees. [1]
Key Facts
The annual percentage rate (APR) is a broad measure of loan cost including interest plus fees like origination and closing charges. [1]
Key Facts
Factor fees are calculated only once based on the original loan amount, with the total divided evenly among scheduled payments. [1]
Key Facts
There is no way to save money by paying off Merchant Cash Advance (MCA) debt early because the total payment amount is fixed. [1]
Key Facts
Most cash advance companies require daily payments through automatic withdrawal from the borrower's bank account. [1]
Capability
Total repayment for a cash advance is determined by multiplying the amount borrowed by the factor rate. [1]

Synonyms & Alternate Names

  • MCA
  • Cash Advance

Disambiguation

  • Not to be confused with traditional business loans
  • Different from invoice factoring

Related Entities

  • Uses:
  • Compared to:

Provenance

Sources

  1. https://secondwindconsultants.com/resource/how-much-are-you-really-paying-for-your-cash-advance (Merchant Cash Advance)

Machine metadata