Glossary · Deal flow
Merchant cash advance (MCA)
A merchant cash advance is a funder buying part of a business's future receivables at a discount, repaid by a share of sales or fixed debits until the RTR is delivered.
Also called MCA, cash advance, business cash advance, revenue-based financing
Legally an MCA is usually structured as a purchase of future receivables, not a loan. The funder pays the merchant a lump sum (the advance amount) and buys the right to receive a larger amount (the RTR), priced with a factor rate.
The merchant remits through a split of card sales or, more often, fixed ACH debits, daily or weekly. Because it is framed as a sale, an MCA generally falls outside usury limits, but courts have recharacterized some as loans when the funder carried no real risk. That is why contracts include reconciliation rights.
Several states now require commercial financing disclosures that reach MCAs. See state commercial financing disclosure laws.
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Related
- SolutionMCA brokers and ISOsA merchant cash advance CRM for ISOs and brokers: lead import, bank statement figures, lender matching, submissions, offers, commissions and renewals in one place.Read
- SolutionMCA fundersA CRM for merchant cash advance funders working ISO submissions: intake, statement figures, underwriting notes and conditions, offers, remittance tracking and renewals.Read
- Free toolMCA factor rate calculatorFree merchant cash advance calculator. Enter the advance, factor rate, fee and term to get payback, daily or weekly payment, cost of capital and an APR estimate.Read
- GlossaryFactor rateThe multiplier that sets what a merchant repays on a cash advance: advance amount times factor rate equals the total payback, usually 1.10 to 1.55.Read
- GlossaryRTR (right to receive)RTR is the total amount of future receivables a funder buys in a merchant cash advance: the advance times the factor rate, also called the payback.Read
- GlossaryHoldbackHoldback is the share of a merchant's revenue that goes to repaying a cash advance, either a fixed split of card sales or the effective share taken by fixed ACH payments.Read
- GlossaryISOIn merchant cash advance, an ISO (independent sales organization) is the broker that finds merchants, packages their files and submits them to funders for a commission.Read
- GlossaryFunderA funder is the company that underwrites and pays out a cash advance or business loan. ISOs submit deals to funders and are paid commission when they fund.Read
- GlossaryReconciliationReconciliation is a merchant's contractual right to have fixed MCA payments adjusted to match actual receipts when sales fall, a key feature of the true-sale structure.Read