Merchant cash advances, in plain English.
Before deciding whether a merchant cash advance fits your business, understand what is being purchased, how funds move, and what your business is agreeing to do.
Start with the transaction
An MCA is commonly structured as a purchase of future business receipts. A provider delivers an upfront purchase price in exchange for an agreed amount of those receipts. The agreement—not the marketing label—defines the transaction and your obligations.
Know the key terms
The purchase price is the amount paid for the receipts. The purchased amount is the total receipts being purchased. The purchased percentage and remittance provisions explain how collections work. Fees or other deductions can reduce the amount your business actually receives.
Understand what happens when sales change
Read the reconciliation provisions carefully. Ask what triggers a review, how to request one, which documents are required, and how an eligible adjustment is calculated. A scheduled remittance should not be assumed to change automatically when revenue changes.
Consider the business case
Start with a specific use for the funds and a realistic view of the cash flow it may generate. Consider how remittances would affect payroll, inventory, rent, taxes, and existing financing. Compare available alternatives and review the complete agreement before accepting.
Ask before you sign
What are the net proceeds? What is the total purchased amount? What fees apply? How do remittances and reconciliation work? Are there security interests or guarantees? What happens on default or early completion? Get answers specific to the actual agreement.