Best Merchant Cash Advance Companies to Consider in 2024

A merchant cash advance is a form of lending where you pay back the loan with future debit and credit card sales. Rather than making monthly or weekly payments as you would with a traditional small business loan, the lender gets a small portion of each debit and credit card sale until the loan is paid back. Our team of financial experts reviewed and ranked the top online lenders to help you get funded. Read on to discover our choices for the seven best merchant cash advance companies.

Merchant cash advances may be a good option if you need access to capital immediately, as funds are typically in your account within one to two business days of loan approval. In this review, we highlight the rates, fees and terms of each lender and explain what makes them a good option. We also share potential downsides of each lender, and provide a rating methodology you can use to select the best option for your needs.

Best Merchant Cash Advance Companies for 2024 - Full Overview

There are several aspects to a merchant cash advance you should consider, especially when it comes to picking the best lender. These factors can help you make the right decision and are the basis for our recommendations.

• Loan features: The terms, payment options, and minimum and maximum amounts available are all important factors to consider when taking out a merchant cash advance.
• Application process: Invasiveness of application information requirements, hard-pull or soft-pull credit score impact, and funding time all play a role in the application process.
• Interest rates and fees: Different types of fees (e.g. loan origination fees) as well as minimum/maximum interest rates were taken into consideration.
• Qualification process: Minimum credit score, annual revenue, and business history requirements will help you narrow down the right lender for your merchant cash advance.
• Customer support: Accessibility to a live CSR rep, the degree of multi-channel support offered, and the availability of supplemental information and tools are something to consider.
• Online user reviews: We looked at online reviews on independent review sites like Trustpilot.
• Perks and bonuses: Specified service offerings like payment flexibility, advertising transparency, and advanced technology are a factor, too.

What Is Merchant Cash Advance?

A merchant cash advance loan is a cash advance based on your future credit and debit card sales. A lender will take a look at your daily receipts and determine how much it thinks you’ll be able to pay back plus interest, usually known as a factor rate.

To work out your total payment, you’ll need to multiply your borrowing amount by the factor rate. For example, if you borrow $50,000 and your factor rate is 1.4, you’ll pay a total of $70,000 (50,000 x 1.4). As you can see, rates can be high, but merchant cash advances are incredibly convenient.

How Does a Merchant Cash Advance Work?

Merchant cash advance companies work in a slightly different way compared to conventional business lenders. In simple terms, a merchant cash advance requires your business to sell your future credit and debit card sales at a discounted figure. You then get access to a lump sum of capital, and payments are made based on future sales.

The holdback – the percentage of your daily card sales – will be sent directly to the lender via your card terminal provider, which means that you have no risk of missing payments.

Merchant Cash Advance Requirements

Since the lender knows roughly how much you can afford based on your credit card transactions, credit scores aren’t as important. Usually, those with scores of 500 or above will qualify. Monthly minimum revenue requirements vary considerably between lenders, but usually range between $2,500 and $15,000. Most lenders also want you to be in business for at least six months.

Applying for a merchant cash advance will not impact your credit score, allowing you to shop around before settling on a lender.

How to Apply for a Merchant Cash Advance

Generally, the application process for a merchant cash advance is much more streamlined than other types of lending. Here are the steps to applying for a merchant cash advance:

• Step one - Submit basic personal details to your chosen lender, including the preferred borrowing amount.
• Step two - The lender will ask for verification of your credit and debit card receipts, usually for the previous 12 months. You can provide this via your business bank statements or via records from your approved payment processor.
• Step three - Lenders may ask for additional information, like your company structure and general financial health.
• Step four - The lender will make a decision within a few hours of submitting your application. If approved, funding is usually dispersed within 24-48 hours.

Merchant Cash Advance Legal Issues

Some people have called the legitimacy of a business cash advance into question, claiming this type of alternative funding is illegal. In the U.S., the Federal Trade Commission (FTC) has launched a thorough investigation into cash advance loans due to potentially unfair contract terms imposed by online lenders.

However, the reality of the matter is that merchant cash advances are not meant to be viewed as loans, and are therefore almost wholly unregulated. They aren’t subject to usury laws or banking laws such as the Truth in Lending Act.

Because of this, lenders don’t need to take credit scores into account and borrowing amounts are almost entirely based on sales figures. This lack of regulation means interest rates and fees can be incredibly high and many companies can often end up trapped in cycles of unpayable debt. Always check your agreement carefully and make sure you’re confident of meeting the repayments.

Merchant Cash Advance Pros and Cons

Pros

• Fast funding - Most lenders will be able to make an instant decision once you’ve submitted your documentation. This means small businesses can have access to a lump sum of cash within 24 hours of applying.
• Unsecured lending - Almost all merchant cash advances are unsecured, meaning your assets aren’t at risk if you default.
• Payments scale with sales - Most agreements will allow payments to fluctuate with sales, meaning that when your sales dip, so do your payments. This makes it easier to manage cash flows.
• Generous borrowing amounts - Borrowing amounts range from $2,000 up to $10 million depending on the lender. Typically, the more monthly revenue you have, the more you’ll be able to borrow.
• Easy application process - As long as you have the right documents on hand, you can finish an application in around 10 minutes.

Cons

• High APR - The factor rates applied here often mean interest rates can run into triple digits. There’s no denying this is a convenient type of borrowing, but it’s very expensive. If you’re not careful, you could get trapped into a cycle of debt.
• Cash flow issues - In some cases, small businesses may struggle to make daily deductions. Some might end up being unable to pay unexpected expenses or daily operating costs if a significant portion of sales go to repaying loans.

Alternatives to Merchant Cash Advances

The fees associated with merchant cash advances are high, making them one of the most expensive forms of borrowing. If you have decent credit, you may want to look into other forms of financing, as well.

Here are some alternatives to merchant cash advances worth considering.

Low (or Zero) Interest Credit Cards

• Promotional interest rates may end up costing you less than factor rates.
• Ideal for candidates with good credit
• Can provide quick funding, especially if you get your card number right away
• Requires you to repay your debt quickly to avoid interest charges

Learn more about Business Credit Card Funding >> 

Invoice Factoring

• Ideal for businesses with outstanding invoices that need capital
• Lenders own your invoices and pay you a percentage of their worth up-front
• Factor charges are a fraction of what merchant cash advances cost
• Generous borrowing amounts available

Here are the best invoice factoring companies of 2023 >>

Equipment Financing

• Ideal for last-minute equipment purchases
• Less flexibility with how you use the funds
• Easy qualification, even with fair credit
• No collateral required (purchased equipment serves that role)
• Interest rates typically lower than merchant cash advance factor rates

Check out these top equipment financing lenders >>

Final Thoughts

The good news for borrowers is that there are a variety of options out there. For those with poor credit, or for whom time is of the essence, a merchant cash advance is one way to get money quickly. This option can be expensive, however, and may compound cash flow problems if you can’t keep up a steady amount of credit card transactions.