A merchant cash advance (MCA) is not a loan. The funder pays a lump sum for the right to a share of a business's future receipts, then collects through a percentage of sales or scheduled debits until the contract's purchased amount is delivered. Ivyview Lenders, a small-business funding broker in Greenville, North Carolina, explains MCA terms beside loan options; funders set every term.
| What it is | A purchase of future receivables. A merchant cash advance is not a loan. |
|---|---|
| How it is collected | A holdback percentage of sales, or fixed daily or weekly debits |
| How cost is stated | A factor applied to the advance; the total is fixed in the contract |
| Clauses to read | Reconciliation, stacking limits, default, personal guarantee |
| Who decides | The funder sets the price and every term |
| Office | 623 S Pitt St #24, Greenville, NC 27834 · (252) 318-3595 |
What a merchant cash advance is, and what it is not
With an MCA, a funder buys a slice of your business's future receipts. You receive the purchase price up front; the funder is entitled to collect the purchased amount, a larger figure fixed in the contract. There is no interest rate and no loan term in the usual sense, because a merchant cash advance is not a loan. It is a sale of receivables, documented, priced and collected differently from the loans elsewhere on this site.
That difference has practical effects. Loan offers are compared by interest rate and amortization; MCA pricing is expressed as a factor, the multiple of the purchase price you agree to deliver. To see the cost in dollars, multiply the purchase price by the factor, then subtract the purchase price. Our factor rate and payback calculator does that arithmetic from the numbers in an offer.
Holdbacks and fixed remittances
Collection works one of two ways. With a holdback, the funder takes an agreed percentage of each day's card or bank receipts, so collections rise on busy days and fall on slow ones. With fixed remittances, the funder debits a set amount from your bank account each business day or each week, an estimate meant to approximate that same percentage.
Either way, collections come out of revenue before it is available for rent, payroll or suppliers. Before you sign, work out what the remittance would be in your slowest week and check that the business could still cover everything else.
Reconciliation when sales drop
Many MCA contracts include a reconciliation clause. On fixed remittances, if revenue drops, you can request a lower debit that matches the agreed percentage of what actually came in. Read exactly how the clause works: how to ask, what documents are required, how often you can ask, and how quickly the funder must respond.
Stacking, default and personal guarantees
Stacking
Stacking means opening another advance before an earlier one has been fully delivered. Each advance takes its own share of receipts, so two or three at once can absorb a large part of daily revenue. Many contracts forbid it, and any lender reviewing a later loan request will see the remittances in your bank statements.
Default
MCA contracts list events of default, such as blocking the funder's debits, changing bank accounts without notice, selling the business or taking on prohibited financing. Consequences can include the whole remaining purchased amount becoming due at once and collection action. Read the default section in full.
Personal guarantees
Funders commonly ask owners to guarantee the business's performance under the contract, for example a promise that the business will not divert its receipts. Ask exactly what the guarantee covers and when it ends.
When an MCA comes up, and what to compare first
Businesses with steady card sales are the usual MCA audience, and restaurants are a frequent example. In Pitt County, 342 restaurants and other eating places had paid employees in 2023 (U.S. Census Bureau, County Business Patterns 2023). Restaurant owners can see how MCAs sit beside equipment and loan options on restaurant and food service financing.
Owners sometimes look at an MCA after a loan request is declined, or because the funder's review centers on recent sales. Those are understandable reasons, and they are also the moments when total cost deserves the closest look. Compare an MCA's total payback with working capital financing and with a line of credit, using the guide MCA vs. line of credit, before deciding.
Questions to ask before you sign
- What is the purchase price, and what is the purchased amount?
- Is collection a holdback percentage or a fixed debit, and how often is it taken?
- How does reconciliation work if my sales fall?
- Can I deliver early, and does early delivery reduce the total?
- Which events count as default, and what follows?
- Does the contract forbid other financing while it is open?
- Who signs a personal guarantee, and what does it cover?
- Will a UCC financing statement be filed against the business, and when will it be terminated?
How Ivyview Lenders handles MCA requests
Ivyview Lenders connects you with lending partners; partners make credit decisions and set rates and terms. With an MCA, price and terms belong entirely to the funder. Our part is to make sure you understand that an MCA is not a loan, to compare it with loan options worth exploring, and to go through an offer's numbers with you. Call (252) 318-3595 or start a request; whether to accept anything is always your decision.
By Ivyview Lenders · Updated