Merchant Cash Advance Definition

Merchant Cash Advance Explained:

What is a Merchant Cash Advance? A Merchant Cash Advance is a financing option for small businesses in which a merchant account provider pays a one-time lump sum to a merchant in exchange for a percentage of future credit card sales. This percentage of sales is collected by the credit card processor until the initial amount plus interest is repaid in full. Because a Merchant Cash Advance is technically classified as a sale of a portion of future sales rather than a conventional loan, it is not subject to interest rate regulation. As a result, the interest paid on a Merchant Cash Advance can be much higher than the interest typically paid on a small business loan.

Merchant Cash Advances are generally marketed to business owners who are unable to secure traditional small business loans due to poor individual credit histories. They allow a merchant to obtain access to cash much more quickly than a traditional loan, and their repayment method allows for some flexibility over time. Merchant Cash Advance payments are typically withheld seamlessly by the credit card processor, much like normal credit card processing fees.

Merchant Cash Advance Video Explanation

Use of this video does not constitute an endorsement of any kind by CardPaymentOptions.com.

Phillip Parker is a former merchant services sales agent who believes the industry has been overrun by people who engage in fraud and deception in order to steal from hard working business owners. He created this website to help you avoid the bad players, save money on fees, and to get peace of mind with your merchant account. If you would like to help support his work, learn more about our cost reduction service. We can evaluate your statement, tell you exactly how much you're overpaying, and then help you dramatically reduce your fees with your current credit card processor. Looking to switch instead? See our list of the best merchant account providers.

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