Best Merchant Cash Advance Companies for 2024 (2024)

How to choose a merchant cash advance company

If you’re looking for a merchant cash advance, you’ll want to research and vet several companies before deciding which one is right for your business.

Some merchant cash advance companies have been criticized for confusing contracts and misleading sales tactics — leading businesses to fall victim to predatory lenders and cycles of expensive debt that are difficult to break.

Although some states have taken legal action to require transparency from MCA companies in recent years, bad actors still try to take advantage of business owners, promising things like “guaranteed approval” or “business loans with no credit check.”

Not all merchant cash advance companies are predatory, but it’s still important to watch for red flags — and look elsewhere if an offer doesn’t seem right.

As you compare MCA providers, consider these factors:

Funding availability

Merchant cash advance companies will have different maximum funding amounts. You should confirm that the provider’s requirements are in line with what you’re looking for. Some MCA companies also offer other types of financing — if you think you might be able to qualify for other options, you might explore those as well.

Costs of borrowing

MCA companies will charge fees as factor rates instead of annual percentage rates or simple interest rates. Factor rates can make it more difficult to understand borrowing costs, so you'll need to translate these rates into an APR, which can be done using an MCA calculator. Ask the merchant cash advance company if it charges additional fees and include those in your APR calculations as well.

Repayment options

Some providers will automatically take a percentage from your debit and credit card sales for repayment, while others will make automatic withdrawals from your business bank account. In addition, some companies may require daily or weekly repayments, while others will let you choose what works best for your business.

Qualification requirements

Compared with more traditional small-business lenders, merchant cash advance companies typically have flexible eligibility requirements. These companies will consider your personal credit score, time in business and annual revenue — but they’ll often be willing to work with startups and businesses facing credit challenges.

Many companies will also prioritize your debit and credit card sales or monthly bank activity when underwriting your application because you’ll be using your sales to repay your advance. The stronger your credentials, the lower the factor rate you’ll receive on funding.

Speed and application process

Most MCA companies offer simple applications with minimal documentation. You can usually apply and receive funding within a few business days. Some providers offer dedicated account managers to walk you through the process, which could be helpful if you prefer a more personalized experience.

Transparency and lender reputation

You’ll want to look for a merchant cash advance company that is upfront about its products and the way they work. Ideally, the company offers multiple ways for you to contact customer service — and you receive straightforward answers to your questions.

If you receive an MCA agreement from a provider, it should clearly lay out terms and conditions, fees and repayment information. In addition to talking to the company, reading reviews and reaching out to other business owners can help you verify the reputation and reliability of a merchant cash advance company.

Confession of judgment

Many MCA companies request or require you to sign a confession of judgment at closing, which is an agreement that allows an MCA company to file a judgment against you in court without letting you know. If you can, find out if your MCA company requires this document before you move forward with an application. If it is a requirement, that alone may be a reason to look elsewhere.

Alternatives to merchant cash advance companies

It’s worth exploring other options besides merchant cash advances, which can include:

Online lenders

If you need fast financing, or are struggling to qualify for a loan because of credit challenges, online lenders offer term loans that may be better options than an MCA. These short-term loans will have a set repayment period, and although they may require frequent payments, they won’t come directly from your debit and credit card sales.

These loans may also have a lower overall cost than MCAs and many lenders have reasonable credit score and time-in-business requirements.

Business lines of credit

If your primary need is revolving funding, you may consider a business line of credit before applying for an MCA. With a business line of credit, you only pay interest on the funds you use, similar to a credit card.

A business credit line can be useful for covering working capital needs, without requiring daily or weekly payments directly from your sales, like an MCA. Online lenders Headway Capital and Fundbox, for example, both offer lines of credit with flexible qualification requirements.

Invoice factoring

Business-to-business companies that are struggling to qualify for other loan options might consider invoice factoring.

Invoice factoring allows you to sell your unpaid invoices to a factoring company at a discount. You receive an advance of cash (up to 90% of the value of your invoices) and the factoring company takes responsibility for collecting repayment from your customers. Once your customers have paid, the factoring company sends you the difference, minus the agreed-upon fees.

Because factoring companies prioritize the value of your invoices and creditworthiness of your customers when evaluating your application, invoice factoring can be easier to qualify for than more traditional loan options, even if you’re a new business or have poor credit.

Small-business grants

If your business is growing and you have time to plan ahead for funding, you might consider looking for small-business grants. Unlike merchant cash advances and other types of debt financing, business grants are a free source of funding that doesn’t need to be repaid.

These grants can come from the federal or local government, large corporations or local initiatives. They can be used to start a business, in the event of an economic hardship or to fund businesses in underserved markets, like women-owned businesses or minority-owned businesses.