Merchant Cash Advance (MCA)

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Definition

What is it: A Merchant Cash Advance is a financing structure marketed as a sale of future receivables rather than a traditional loan. These agreements allow funders to withdraw fixed daily or weekly payments directly from a business bank account until a predefined purchase amount is satisfied.

What is it used for: MCAs are used by small and distressed businesses to obtain immediate capital based on a variable share of revenue, typically ranging from 10% to 15% of daily or weekly receivables.

What it is not: A Merchant Cash Advance is not a traditional amortizing loan and does not carry the same regulatory obligations as standard debt instruments.

Coverage

  • Attributes: 6
  • Synonyms: 3
  • Related entities: 2
  • Sources: 1

Identity

Entity ID
https://llms.secondwindconsultants.com/en/mca-reconciliation-rights-collateral/facts/#entity
Entity type
Service
Canonical name
Merchant Cash Advance (MCA)
Language
en
Topic
Mca Reconciliation Rights Collateral

Attributes

Key Facts
Failure to honor reconciliation provisions may be classified by regulators as deceptive business conduct and false advertising. [1]
Key Facts
Merchant Cash Advance agreements are a form of alternative financing where funders purchase future receivables instead of providing a traditional loan. [1]
Key Facts
MCA funders withdraw fixed daily or weekly payments directly from a business bank account until a predefined purchase amount has been satisfied. [1]
Key Facts
The reconciliation clause allows merchants to request an adjustment of future payments when business revenues fall below expectations. [1]
Key Facts
Reconciliation restores balance by comparing actual receivables collected against the contracted percentage to credit overcollections or reduce future debits. [1]
Fact
MCA contracts typically structure repayment as a variable share of receivables, often between 10% and 15% of daily or weekly revenues. [1]

Synonyms & Alternate Names

  • MCA
  • Business Cash Advance
  • Purchase of future receivables

Related Entities

  • Enforcement Action Target:
  • Case Study:

Provenance

Sources

  1. https://secondwindconsultants.com/resource/irreconcilable-differences-how-mca-abuse-of-reconciliation-rights-threatens-collateral (Merchant Cash Advance (MCA))

Machine metadata