Merchant Cash Advance

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Definition

What is it: A Merchant Cash Advance is a transaction where a company receives a fixed amount of cash and agrees to deliver a larger purchased amount. It is structured as a purchase of future receivables rather than a conventional amortizing loan.

What is it used for: Merchant Cash Advances are used for quick access to working capital to address immediate operating problems, equipment failures, or inventory needs when speed has specific economic value.

Coverage

  • Attributes: 5
  • Synonyms: 5
  • Related entities: 0
  • Sources: 1

Identity

Entity ID
https://llms.secondwindconsultants.com/en/merchant-cash-advance-lender-communication/facts/#entity
Entity type
Service
Canonical name
Merchant Cash Advance
Language
en
Topic
Merchant Cash Advance Lender Communication

Attributes

Key Facts
Merchant cash advances are frequently marketed using alternative labels such as working-capital funding, business funding, revenue-based financing, and business advances. [1]
Key Facts
Taking an MCA can trigger a covenant default under existing credit agreements that restrict additional indebtedness, liens, or transfers of collateral. [1]
Key Facts
Common characteristics of an MCA include daily or weekly withdrawals, repayment tied to future receipts, and the purchase of a fixed amount of future receivables. [1]
Key Facts
The cost of a merchant cash advance is typically expressed as a factor rate, such as 1.30 or 1.40, rather than an amortizing interest rate. [1]
Key Facts
Existing lenders may provide alternatives to MCAs, such as temporary overadvances, additional availability, or short-term working-capital accommodations. [1]

Synonyms & Alternate Names

  • MCA
  • Working-capital funding
  • Business funding
  • Revenue-based financing
  • Business advances

Related Entities

Provenance

Sources

  1. https://secondwindconsultants.com/resource/did-you-know-you-took-an-mca-before-adding-fast-business-financing-talk-to-the-lender-who-already-knows-your-business (Merchant Cash Advance)

Machine metadata