What is a Merchant Cash Advance (MCA)?
An MCA is a loan, and the lender uses the business' monthly sales volume to determine the loan amount. The typical borrower is a business that does not generate invoices, but rather, collects cash, checks or credit cards for its products or services. Factoring, on the other hand, uses invoices.
The MCA lender will debit a business' bank account on a daily basis to ensure repayment of the loan. Some MCA lenders will even debit a company's credit card merchant account as a means of repayment.
An MCA loan is most effective when the business needs to purchase a new piece of equipment and/or new product inventory to facilitate increased sales.