Merchant cash advance

Definition

A merchant cash advance (MCA) is working capital provided to a business in exchange for a share of future sales or receivables. Repayment is typically a fixed percentage of card receipts or bank deposits until the purchased amount is collected. Many providers document the product as a purchase of future receivables rather than a term loan, and they quote a factor rate instead of an APR. This page does not print a factor rate, an APR, or a rule that an MCA is or is not a loan in every state. Courts and statutes treat structures differently. Read the contract. It is not consumer point-of-sale installment credit.

This page is the receivables-purchase working-capital product. Adjacent terms are Vertical Fintech’s. They are not this page. Embedded lending (how capital is offered inside software), residuals, and KYB sit next to this definition.

Why it matters

If you run vertical software and want to offer merchants capital inside the product, MCA-shaped repayment (a cut of daily sales) is common because it rides the same card volume you already see. Speed and underwriting on sales history are the pitch. The honest cost is often higher and less comparable than a bank term loan, and the merchant can feel the holdback on slow weeks. You are usually not the funder. A partner originator or MCA provider underwrites and takes the credit risk. Ask who the merchant agreement names, whether the product is documented as a loan or a purchase, how the holdback works when sales drop, and whether your brand is on the collection. Do not invent an APR from a factor rate on this page. If the job is consumer checkout credit, you are on a different listing cluster.

Related on Vertical Fintech

• Lending: Embedded credit and capital offered through the software the merchant already runs.
• Pipe: White-labeled or API-embedded working capital. License posture on the live table is merchant cash advance.
• Liberis: White-labeled or API-embedded working capital. Live table: receivables finance.
• Parafin: White-labeled working capital with Parafin running underwriting and the lending stack. Bank-originated program, not a generic MCA label.

FAQ

Is a merchant cash advance a loan?

Sometimes the marketing says no, because the contract is a purchase of future receivables. Some states and some structures are treated more like lending. This page does not decide that for your program. Ask counsel and read the merchant agreement. Do not advertise APR math you did not compute under the rules that apply.

Is this the same as embedded lending?

No. MCA is a product shape (sales-based holdback against future receipts). Embedded lending is the distribution model: offering capital inside software the merchant already uses. An embedded program can be MCA, a bank loan, or installment credit. That adjacent term is next.