MCA Funding Company

A merchant cash advance (MCA) is a short-term financing option in which a business receives a lump sum of funding and pays the money back incrementally. A percentage of the company’s daily or weekly credit or debit card sales is normally deducted as repayment for the funding. A merchant cash advance is a type of short-term funding in which a business gets a set amount of cash upfront from a financing provider, and then typically repays the money with a percentage of daily or weekly credit or debit card sales. Rather than making a set amount of monthly payments, a small percentage of your debit or credit card sales is automatically withheld to repay the merchant cash advance. This continues until the debt has been paid off. For example, if you were to take out a merchant cash advance for a renovation to your small business, the company would give you a lump sum that you could use right away. The MCA funding company would then take a percentage of your daily card sales until your balance, plus interest and fees are paid in full. MCA funding companies typically have higher rates and fees than other lending products. They evaluate risk and weight credit criteria differently than a traditional banker might. The funding company looks at the daily credit card receipts to determine if the business can pay back the advance in a timely manner. Basically, the small business is selling a portion of future credit card sales to acquire capital immediately. MCAs are not technically considered loans. As a result, these funding companies are not subject to the same laws or federal regulations as traditional small business loans, which leaves more room for manipulation. MCAs are regulated by the Uniform Commercial Code as established by each state in the U.S., rather than federal banking laws such as ‘The Truth in Lending Act.’