What is a merchant cash advance?
A merchant cash advance gives a business a lump sum that it repays through a share of its daily card sales plus a fixed fee. It is fast, but the fixed fee often makes it more expensive than a term loan, so compare the total amount repaid before you accept.
See the full glossaryMerchant Cash Advance Alternative
Lower-Cost Loans, Predictable Payments
Merchant cash advances (MCAs) are fast, but often very expensive — factor rates of 1.2x to 1.5x translate into annualized costs of 60% to 150%. lendflo provides access to term loans and working capital with lower rates and predictable fixed monthly repayments.
MCA vs. lendflo — Cost Comparison
| Feature | Merchant Cash Advance | lendflo |
|---|---|---|
| Fee structure | Factor rate 1.2x–1.5x | Standard interest rate |
| Effective annualized cost | Often 60–150% APR equivalent | Lower depending on profile |
| Repayment | Daily % of card sales | Fixed monthly — predictable |
| Cost transparency | Low — factor rate is obscure | High — clear nominal rate |
| Approval timeline | 1–3 days | Fast |
| Amount available | $5K–$500K typically | $5K–$2M |
FAQ — MCA vs. Business Loans
We’re here to simplify your business financing journey, so you can feel confident every step of the way.
MCAs use a factor rate rather than an interest rate. A 1.3x factor on $100,000 means $130,000 back. If you repay in 6 months, the effective annualized rate often exceeds 60–80%. Term loans through lendflo have lower nominal rates and lower total costs for most borrowers.
Yes, in some cases — particularly for seasonal businesses or those with high credit card volume but poor credit. lendflo works with lenders covering similar profiles with more competitive rates. Compare before committing.
On $100,000 at a 1.3x MCA factor rate, you repay $130,000. Via lendflo at 15% annually over 12 months, you pay roughly $108,000 (interest included). The difference is significant — always compare total cost of capital.
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Quick answer
What does a merchant cash advance really cost?
A merchant cash advance is repaid with a fixed multiple of the amount advanced, called a factor rate, usually taken as a share of daily card sales. At a 1.3 factor rate, a $50,000 advance costs $65,000 to repay, a $15,000 cost that can be a high effective rate when repaid quickly. A term loan or working-capital loan is often cheaper.
How the math works
Because the cost is fixed up front, repaying an advance early does not usually lower it. A $50,000 advance at a 1.3 factor rate repaid over six months costs the same $15,000 as one repaid over twelve, so the faster it is repaid, the higher the effective annual cost.
When an advance can still make sense
- Card-sales-heavy businesses that need money within days
- Short-term needs where repayment tracks sales automatically
- Owners who cannot qualify for a term loan yet
Alternatives worth comparing
- Working capital loans for $5K to $250K, funded quickly
- Term loans for $25K to $2M with fixed monthly payments
- Equipment financing, where the equipment itself secures the loan
Ask for the total repayment amount
Whatever you choose, ask every lender for the total dollar amount you will repay and the schedule. lendflo presents offers from multiple lenders so you can compare them on the same terms.
Compare Before Signing an MCA
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See My Options — FreeQuestions to ask any lender or broker before you sign
The same six questions work for a bank, an online lender or a broker.
- How are you paid? — and will I ever pay a fee?
- What is the total I will repay? — not just the interest rate.
- What happens if I repay early? — is there a charge?
- Do I need collateral or a personal guarantee? — read the offer for the clause.
- How soon will funds arrive? — after approval and signing.
- Who will I deal with afterwards? — the lender or the broker.
Merchant cash advance or term loan
The cost is stated differently, so compare the total repaid.
| Feature | Merchant cash advance | Term loan |
|---|---|---|
| How the cost is stated | A factor rate (1.3 means repay 1.3 times the amount) | An interest rate over a fixed term |
| How you repay | A share of daily card sales plus a fixed fee | Fixed monthly payments |
| Repaying early | The fixed fee does not shrink | Depends on the lender’s terms |
| Typical cost | Often higher | Often lower |
Terms explained
What is a merchant cash advance?
A merchant cash advance gives a business a lump sum that it repays through a share of its daily card sales plus a fixed fee. It is fast, but the fixed fee often makes it more expensive than a term loan, so compare the total amount repaid before you accept.
See in the glossaryWhat is a factor rate?
A factor rate is a multiplier used to price some short-term financing, such as a merchant cash advance. You multiply the amount advanced by the factor to get the total you repay: at a factor rate of 1.3, a $50,000 advance costs $65,000 to repay. It is not an annual interest rate.
See in the glossaryWhat is the total cost of borrowing?
The total cost of borrowing is everything you pay on top of the amount you borrow, including interest and fees. The annual percentage rate (APR) expresses that cost as a yearly percentage so offers can be compared. Always compare the total amount repaid, not only the interest rate.
See in the glossaryTopic guide
Part of the guide: Working capital and cash flow
Covering everyday costs: working capital, lines of credit, invoices, seasonal gaps and cash-flow planning.