How do you repay a merchant cash advance?

A merchant cash advance is repaid with a pre-determined percentage of your daily credit/debit card sales. This percentage is set when you sign the MCA agreement. Once you’ve received the funds, the payments will automatically be deducted from your daily card sales. Depending on the MCA lender, collections may occur via daily, recurring ACH payments or a direct debit from your bank account.

Is a merchant cash advance a good option for a startup?

A merchant cash advance can be a good option for a startup, as it provides quick access to funds with minimal paperwork. However, the total cost and the repayment terms of the loan may be too much for some businesses without a reliable income. Make sure you understand the repayment structure and that it is something you can afford to pay back. Additionally, consider whether there are other options that may be more suitable for your startup, such as a small business loan or a line of credit.

Can my startup get a merchant cash advance if I have bad credit?

Unfortunately, having bad credit will make it difficult for you to get a merchant cash advance for your startup. It’s not entirely impossible, though. Generally, lenders will look at an applicant's credit score as an indication of their creditworthiness. If a lender views an applicant's credit score as too low, they may not be willing to provide a merchant cash advance. However, there are a few lenders who are willing to take on higher-risk loans and may be willing to offer a merchant cash advance to startups with bad credit.

What happens if you don’t pay back a merchant cash advance?

If you stop making payments on your merchant cash advance, your lender may take legal action against you to collect the debt. This could involve sending a collections agency to your place of business or even taking you to court. Depending on the lender’s agreement, you may also face additional fees, such as late payment fees or administrative costs, if you’re unable to make payments on time.

About the Author

Christopher Murray

Christopher Murray

Personal Finance Expert

Christopher Murray is a professional personal finance and sustainability writer and editor who enjoys writing about everything from budgeting and saving to unique investing options like SRI and cryptocurrency.

More about me

Related Articles

Show More