Working-capital advances (merchant cash advances)

A provider pays you a lump sum now in exchange for a share of your future sales, usually collected by daily or weekly debits. It is often not a loan, it is usually the most expensive way to get cash, and you should generally compare a line of credit or term loan first.

At a glance

Typical amount: $5,000 to $250,000, repaid from daily or weekly sales
Time to funds: Often a few days
What providers look at: Card sales or bank deposits; credit matters less. Usually the most expensive option, so compare the total payback.
How it's repaid: A share of daily or weekly sales, or a fixed daily or weekly debit, until a set payback amount is reached. Often not a loan.

Ranges vary by provider and are not offers. This page is educational; we don't take requests for advances.

How it works

Most advances are structured as a purchase of future sales, often not a loan. The provider buys a fixed amount of your future card sales or deposits at a discount and collects it by taking a share of each day's sales or a fixed daily or weekly debit from your bank account until the full amount is repaid.

Payments are often daily or weekly, which takes cash out of the business before you can use it.
Fees may be withheld from what you receive, so the cash you get is less than the advance amount.
Personal guarantees are common, even when an offer says no collateral is needed.
Because it's often not a loan, some lending rules don't apply. Read the contract closely.

What it costs

The cost is set by a factor rate. A factor rate of 1.40 means you repay $1.40 for every $1 advanced: $70,000 on a $50,000 advance. A factor rate is not an interest rate, and the two can't be compared directly.

Converted to an estimated annual percentage rate, advances are usually very expensive. In the example above, repaid by business-day debits over about seven months with no fees withheld, the estimated APR is above 100%. Paying it off faster raises the APR, because you pay the same amount over less time.

Use the factor rate to APR calculator with the numbers in any offer you get.

When it fits

A short, specific gap with a clear and quick return, such as stock for a confirmed order.
You've been turned down for a line of credit and a term loan, and you've compared the total payback.
Your sales are steady enough to absorb daily or weekly debits.

When it doesn't

You qualify for a line of credit or a term loan. Either usually costs far less.
You'd use it to make payments on another advance. Stacking advances can overwhelm cash flow quickly.
Your sales are seasonal or falling.

Ask for the disclosure

California, New York, Utah, Virginia, Georgia, Florida, Connecticut, Kansas, Missouri and Texas have commercial financing disclosure laws. Depending on the state and the size of the deal, a provider may have to give you a written disclosure before you sign that shows the total cost and payment terms. In California and New York, covered offers must also show an estimated APR.

Ask for the disclosure before you sign, even if you aren't sure your state requires it.

State	Law
California	Cal. Fin. Code 22800 and following (SB 1235)
New York	N.Y. Fin. Serv. Law 801 to 812
Utah	Utah Code 7-27
Virginia	Va. Code 6.2-2228 to 6.2-2238
Georgia	O.C.G.A. 10-1-393.18
Florida	Fla. Stat. 559.961 to 559.9615
Connecticut	Conn. Gen. Stat. 36a-861 and following
Kansas	K.S.A. 75-783 and following
Missouri	Mo. Rev. Stat. 427.300
Texas	Tex. Fin. Code ch. 398 (HB 700)

What to have ready

Business bank statements. The last three to six months. Nearly every lender asks for these first.
Formation documents and EIN. Articles of organization or incorporation, plus your IRS EIN letter.
ID for each owner with 20% or more. A driver's license or passport. Lenders verify everyone with a significant stake.
Debt schedule. A list of current business loans and advances, with balances and payments.