Also called a merchant cash advance, or MCA. A plain-English explainer of how it works, what it costs, and when it makes sense.
A merchant cash advance, more accurately called revenue-based financing, is a sum of capital advanced to a business and repaid as a fixed percentage of the business's daily or weekly revenue.
It is not a loan. There is no interest rate, no fixed monthly payment, and no defined maturity date. Instead, the advance has a total payback amount (the advance plus a fixed fee) that gets remitted as the business generates revenue.
When the business is busy, more goes back faster. When the business is slow, less goes back. The total payback is fixed; the time to pay it back is variable.
The cost of an advance is expressed as a factor rate, not an APR. The factor is a multiplier applied to the advance amount to get the total payback.
The factor rate is set at origination based on time in business, monthly revenue, industry risk, and credit profile. It does not change.
The remittance schedule is also fixed at origination. It does not change with your revenue — only the time to pay back changes.
| Bank term loan | Revenue-based advance | |
|---|---|---|
| Cost format | Interest rate (APR) | Factor rate |
| Payment | Fixed monthly | Daily/weekly ACH, fixed dollar |
| Term | Fixed (e.g., 5 years) | Variable, estimated |
| Speed to fund | 2–8 weeks | 1–3 business days |
| Approval threshold | Strict | Revenue-weighted |
| Cost of capital | Lower | Higher |
| Best for | Long-term investments | Short-term opportunities or bridges |
A bank loan is almost always cheaper if you can get one. Revenue-based financing isn't a replacement, it's a different tool. Use it when speed, access, or flexibility matter more than absolute cost.
Discounted inventory. A supplier offers you a deep discount for paying upfront on a bulk order. The discount more than covers the cost of capital.
Equipment that immediately pays for itself. A new piece of equipment that increases throughput or unlocks a contract.
Seasonal cash flow gap. Revenue dips before a busy period and you need capital to staff up, stock up, or market.
Short-term bridge to a known event. You're closing a contract, finalizing financing elsewhere, or have a receivable about to land.
Bank can't move on your timeline. You qualify for a bank loan but they're 6–8 weeks out and the opportunity won't wait.
You're papering over a structural loss. If your business is unprofitable on the underlying margins, additional capital makes the problem worse.
You already have multiple active advances. Stacking is the leading cause of MCA-driven business failure.
The math doesn't pencil. If even at our best terms your projected revenue can't comfortably cover the daily remittance plus existing operating expenses, the answer is no.
You haven't tried the cheaper options. SBA loans, lines of credit, equipment financing — these are usually cheaper.
We're a direct lender. We deploy our own capital and make every credit decision in-house. The terms we quote are the terms we hold.
We turn down most files. We say no when the math doesn't work for you. Saying yes to a bad deal helps no one.
We service in-house. Every conversation, every modification, every renewal is with the team that wrote your deal.
