A lump-sum advance against future sales, repaid daily or weekly as a percentage of revenue or a fixed ACH debit. Fast, revenue-led, broadly accessible — but expensive if mispriced.
Revenue-based financing — historically and legally known as a merchant cash advance (MCA) — is not a loan. Structurally, it's the sale of a portion of your future receivables to a funder in exchange for a lump sum today. That distinction matters because the product is priced with a factor rate — not an APR — and repaid by collecting a percentage of card sales or a fixed daily/weekly ACH debit until the agreed-upon payback amount is collected.
Revenue-based financing exists because a lot of real, healthy small businesses can't pass a bank's credit-led underwriting but do have strong, consistent revenue. The trade is straightforward: you get speed, accessibility, and revenue-based qualifying — and you pay for it.
Three numbers define every MCA:
On a $50,000 advance at a 1.28 factor over 9 months: total payback is $64,000, collected as ~$339 per business day across 189 business days. The cost in dollars is $14,000. Translated into a comparable APR, that's roughly 60% effective APR — not because lenders are lying, but because factor rates and APR are different math. Always run the conversion before signing.
Partner-network minimums for an MCA — across most lenders we work with — sit around 500+ owner FICO, six months in business, and $10,000+ in monthly business deposits (consistent across at least three months of statements). Stronger files (12+ months in business, $25k+/month, 600+ FICO) get materially better factor rates. The single biggest pricing lever is deposit consistency, not credit score.
MCAs are misused more often than they're abused. The cleanest use cases are short, ROI-positive uses of capital where the time value of speed matters more than the cost: filling a same-week inventory order from a major customer, replacing equipment that's idling production, taking advantage of a supplier discount that exceeds the cost of capital. Long-horizon uses (build-out, vehicle purchases, seasonal stockpiling for next year) belong in cheaper products if you qualify for them.
Three contract terms have outsized impact: the holdback or daily debit amount (relative to your actual daily deposits), the reconciliation clause (whether you can request a payment recalculation if revenue dips), and any confession of judgment language (banned in New York commercial transactions since 2019, but still exists in some out-of-state contracts). Read these end to end. A reputable broker explains them line by line before you sign.
Most MCA lenders in our network approve at 500+ owner FICO. Lower scores are possible with strong deposit history (12+ months in business and $20,000+ in monthly business deposits), but pricing reflects the additional risk.
Most approved MCAs fund within 24–48 hours of a signed contract. Files with clean documentation (3 months of business bank statements, photo ID, voided check) move fastest.
A factor rate is a multiplier — 1.28 on a $50,000 advance means $64,000 total payback. APR is annualized cost. The same factor rate produces very different APRs depending on term length: 1.28 over 9 months is roughly 60% APR, but 1.28 over 18 months is roughly 30% APR. Always convert before signing.
No. An MCA is the legal purchase of a portion of your future receivables. That structural difference is why MCAs aren't governed by traditional lending APR-disclosure rules and why pricing uses a factor rate instead of interest.
Stacking is taking out a second (or third) MCA while a first is still active. It's risky because each new daily debit compounds the cash-flow drag on the business — most files that fail underwriting at our network are over-stacked, not credit-impaired.
Some MCAs offer prepayment discounts (often 5–15% off the remaining payback). Many do not — the full factor-rate payback is owed regardless of how fast you repay. Confirm this in writing before signing.
For most MCAs: three months of business bank statements, a voided business check, owner's driver's license, and basic business information (EIN, time in business, industry). Stronger files may also include YTD profit & loss and a current debt schedule.