KNOW WHAT IT COSTS
Merchant cash
advance, explained.
A merchant cash advance is the fastest money in small business — and the easiest to misread. Understand the factor rate and you can use it as a tool. Skip that math and it can quietly become the most expensive capital you'll ever take.
The short version
- An MCA isn't a loan — it's the sale of a slice of your future sales at a discount.
- It's priced with a factor rate, not interest. Paying early doesn't lower the cost.
- It funds fast and forgives weak credit because it's underwritten on your sales, not your score.
- Used for the right short, revenue-generating reason it works. Used to plug a deepening hole it compounds.
What a merchant cash advance actually is
A funder gives you a lump sum today. In exchange, they buy a fixed dollar amount of your future revenue and collect it back through a small daily or weekly slice of your sales — usually pulled straight from your bank account or card processing. That's it. There's no interest rate in the traditional sense, no fixed monthly payment, and no amortization schedule.
Because it's a purchase of receivables rather than a loan, approval hangs on one question: are the sales there? Funders read your recent bank statements, confirm the deposits are steady, and size the advance against them. That's why an MCA can fund in a day or two and why a credit score in the 500s isn't a dealbreaker.
An MCA isn't priced on what you borrow. It's priced on what you'll repay — fixed, up front.
Factor rate vs. APR — the number that matters
This is where owners get hurt, so let's be plain. A factor rate is a flat multiplier. If you take $50,000 at a factor rate of 1.35, you owe $67,500 — full stop. That $17,500 is the cost of the money, and it does not shrink if you pay it back early. A 12% interest rate and a 1.12 factor rate are not the same animal; the factor rate is almost always more expensive than it looks.
What $50,000 really costs
| Factor rate | You receive | You repay | Cost of capital |
|---|---|---|---|
| 1.15 | $50,000 | $57,500 | $7,500 |
| 1.25 | $50,000 | $62,500 | $12,500 |
| 1.35 | $50,000 | $67,500 | $17,500 |
| 1.49 | $50,000 | $74,500 | $24,500 |
Now the twist: because repayment is compressed into months, not years, the effective APR runs high. Repay that 1.35 advance over six months and the true annualized cost can clear 70%. That isn't a reason to never use an MCA — it's the reason to only use one when the money will earn more than it costs, fast.
Want the true cost on your offer?
Send us the factor rate and term and we'll convert it to a real APR and a dollar figure — in plain English, in a few minutes.
The holdback: how repayment actually feels
Repayment is a holdback — a set percentage of daily or weekly sales, or a fixed daily debit. The upside is that a card-based holdback flexes: slow week, smaller pull. The danger is the fixed-daily version, which doesn't care whether today was busy or dead. Before you sign, you need to know exactly what leaves your account each day and whether your thinnest week can absorb it.
When an MCA is the right tool
- A short, revenue-generating push: inventory for a confirmed order, equipment that unlocks more billable work, a time-boxed marketing spend.
- A real opportunity that expires before a bank could ever move.
- A gap you can clearly repay from the very sales the money helps create.
When to walk away
- You'd be covering a shortfall that's getting worse, not better — that's how stacking starts.
- You're already carrying one or more advances. A second or third is rarely the fix; consolidation usually is.
- A slower, cheaper product would do the same job. If you can wait, a term loan or line of credit almost always costs less.
How Titan handles it
We're a consultancy, not a single-product shop, so we'll tell you when an MCA is the wrong answer. When it's the right one, we shop your file to multiple funders, show you the factor rate and the true cost, and make sure the daily holdback fits your slowest week — not just your best one.
Questions owners ask
Is a merchant cash advance a loan?
Technically no. An MCA is the purchase of a portion of your future sales at a discount. That legal distinction is why MCAs are priced with a factor rate instead of an interest rate, and why they can fund faster than a traditional loan.
What is a factor rate on an MCA?
A factor rate is a flat multiplier on the amount advanced. Borrow $50,000 at a 1.35 factor and you repay $67,500 total, no matter how fast you pay it off. Unlike interest, it does not shrink when you repay early.
What credit score do you need for a merchant cash advance?
MCAs lean on your sales, not your score. Many funders work with credit in the 500s because they are underwriting your daily deposits and bank statements, not your credit report.
How much does a merchant cash advance cost?
Cost is set by the factor rate, typically 1.1 to 1.5. The shorter the real repayment window, the higher the effective APR. We always convert the factor rate to a true cost before you sign.
How fast can I get a merchant cash advance?
Often within 24 to 48 hours of approval. The application is short and underwriting is based mostly on recent bank statements, which is what makes the timeline so fast.
See every option, not just the fast one
One short application shows what you qualify for across products — advance, term loan, or line of credit. No obligation.