Glossary

Merchant cash advance

Cash now for a fixed amount of future receivables.

A merchant cash advance (MCA) is a purchase of a fixed amount of your future receivables in exchange for cash now, repaid as a percentage of card sales (holdback) or by fixed daily or weekly debits. It is priced with a factor rate and is usually structured as a purchase rather than a loan; whether that classification holds depends on the contract’s substance and the jurisdiction. Full explainer.

How it appears in a contract

Titled a "merchant agreement" or "purchase and sale of future receivables". Look for the purchased amount, the specified percentage or fixed remittance, any reconciliation right, and personal guarantee terms.

Worked example

A 12% holdback on $40,000 of monthly card sales remits about $4,800 a month against a $39,000 purchased amount: roughly eight months if sales hold, faster if they rise.

Illustrative figures on stated assumptions; not quotes.

What to ask

• Percentage holdback or fixed daily amount?
• Is there a reconciliation right if sales fall?
• What is the estimated APR on the expected term?

Related terms

Holdback · Purchase of future receivables · Factor rate · Stacking · Revenue-based financing · all terms