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Merchant Cash Advance Reviews

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  • OnDeck Review

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    Pros Relaxed borrower qualifications Relaxed credit score requirements Competitive terms and fees Short application process Excellent customer support Prepayment discounts Cons Potentially high factor rates Opaque advertising Overview OnDeck is a hugely prolific online lender. Founded back in 2007, OnDeck became one of the first lenders to rely primarily on technology to make their lending decisions. With […]

  • Square Capital Review

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    Pros Relaxed borrower qualifications No credit score requirement Short application process Low rates and fees No additional fees Cons Only available to Square sellers Poor customer support Overview Square, the most popular and widely known mobile POS on the market, is an innovator in all things small-business and credit-card related. They’ve been the first, or […]

  • PayPal Working Capital Review

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    Pros Relaxed borrower qualifications No credit score requirement Easy application process No origination fee Excellent support materials Cons Only available to PayPal sellers Potentially high factor rates Poor customer support Overview PayPal is one of the biggest names in the eCommerce space. If you sell online, chances are you use PayPal, at least as a […]

  • Shopify Capital Review

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    Pros Suited for small business Relaxed borrower qualifications Competitive terms and fees Easy application process Cons Only available to Shopfy users Potentially expensive fees Overview Shopify is widely regarded by eCommerce experts and business owners alike as one of the best shopping carts available, and we recommend it highly here at Merchant Maverick. This eCommerce […]

  • CapFusion Review

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    Pros Relaxed credit score requirements Low factor rates Cons High origination fee Fair public reputation Overview CapFusion is a Kansas-based alternative lender. Companies like CapFusion eschew the focus on credit ratings favored by traditional banks and look instead at your monthly revenue. This allows previously overlooked businesses to access capital quickly, though at a premium […]

  • QuarterSpot Review

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    QuarterSpot is an online lender that offers a short-term loan product. Founded in 2013, the company has yet to hit the same level of name recognition as some of its competitors like OnDeck and Kabbage. Regardless, QuarterSpot stands out from the competition for a couple of different reasons.

  • Reliant Funding Review

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    Pros No credit rating requirements Good public reputation Cons Opaque terms and fees Some additional fees Overview Reliant Funding is a San Diego-based alternative business funder whose recent acquisitions include Merchants Capital Access.  It’s part of a growing industry that provides merchant cash advances (MCAs) rather than traditional lending products like bank loans. MCAs superficially resemble […]

  • Rapid Advance Review

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    Pros Low factor rates Low origination fees Cons Some additional fees Limited support materials Overview Rapid Advance is a Maryland-based non-traditional small business funder. It offers merchant cash advances (MCAs) and short-term business loans to small businesses seeking short-term funding. Unlike many of its competitors, it offers a number of variations on the typical MCA, leading […]

  • ForwardLine Review

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    ForwardLine is an alternative lender based in Southern California that primarily serves small businesses. One of the earliest businesses of its kind, ForwardLine has been funding merchants since 2003 and has managed to maintain a mostly positive reputation during that time. The company’s recently made a shift away from merchant cash advances and into medium-term loans. This shift comes with slightly higher qualifications and better rates.

  • Swift Capital Review

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    Note: Swift Capital has partnered with PayPal to offer business loans under the name LoanBuilder. The company no longer offers the financial products described below. See our LoanBuilder Review for an up-to-date review of the products offered by this company.  Highlights Merchant cash advances Working capital funds 48-72 hour funding decisions Weekly fixed ACH repayments Poor […]

This category covers two types of business financing—merchant cash advances and short-term loans. Although legally they are different products, in practice the two act very similar; most MCA companies offer both products to their customers.

What is a Merchant Cash Advance?

A merchant cash advance (MCA) is a type of business funding. This type of funding is not a loan, but a sale of future receivables. In other words, the MCA company (the buyer) is purchasing the future revenue of a business (the seller) at a discount.

Fees for borrowing are calculated using a flat fee multiplier, sometimes also called a “buy rate” or “factor rate.” The total repayment amount is calculated by multiplying the borrowed amount by the fee. For example, a merchant with a borrowing amount of $10,000 and a flat fee of 1.3 will have to repay $13,000 (10,000 x 1.3 = 13,000). This fee may also be written as a percentage (ex: your fee is 30% of the borrowing amount), but should not be confused with an interest rate.

Flat fees for MCAs generally range between 1.1 and 1.6 depending upon the MCA company, the strength of your business, and other factors.

Repayment is made by collecting a certain percentage of each sale; this percentage is called the withholding rate. For example, the MCA company might collect 15% of every sale, meaning for every dollar processed, the MCA company will get $0.15 and you will get $0.85. There are three different ways an MCA company can collect their cut:

  • Split withholding: The MCA company will partner with your credit card processor. When your processor receives a payment, they will automatically route the MCA company’s percentage to the company, and your percentage to your business bank account.
  • Lockbox withholding: The MCA company will set up a bank account in your name, but which they have access to. Your business revenue will go into this account, and the MCA company will deduct their cut at the end of each day before sending the remainder to your regular business bank account.
  • ACH withholding: The MCA company will deduct their percentage from your business bank account each day via automated clearing house (ACH), a type of electronic network used to transmit money between bank accounts.

Because your repayment fluctuates according to cash flow, merchant cash advances do not have a set maturity date. However, most MCAs are designed to be repaid in less than two years if your cash flow remains consistent.

What is a Short-Term Loan?

A short-term loan (STL) is very similar to a merchant cash advance. Unlike the latter, a short-term loan is (as one may guess) technically a true loan. In exchange for taking on debt owed to the company, you get access to immediate funds for your business.

Fees for borrowing are calculated as they would be for a cash advance. You are assigned a flat fee multiplier which determines your total payment amount. If you have a fee multiplier of 1.15, and you are borrowing $150,000, you will have to repay a total of $172,500 (150,000 x 1.15 = 172,500). Flat fees for these products normally range between 1.1 and 1.6 (or, in other words, 10% – 60% of the total borrowing amount).

Repayment is made on a daily basis by deducting a fixed amount from your bank account each business day via ACH.

Because the lender knows how much they’re deducting from you every day, there is a set date at which you will be done making payments (assuming you never miss a payment). Most short-term loans are repaid in under two years, though some lenders are beginning to offer term lengths up to three years to qualified borrowers.

Questions to Ask Before Borrowing

Some types of funding, especially merchant cash advances and short-term loans, are notorious for sending inexperienced businesses into financial difficulty. Because short-term funding tends to come with high fees and short repayment schedules, some businesses may suffer from the rate of repayment.

Before you accept an offer for short-term funding, ask yourself (or your funder) these questions:

What is the APR? What is the cents-on-the-dollar cost?

Because this type of financing is so unusual, it can be difficult for business owners to understand the costs. In order to fully understand the cost of borrowing and compare offers, it’s best to calculate both the APR and the cents-on-the-dollar cost.

The annual percentage rate (APR) communicates the cost of borrowing over the course of a year. Because short-term funding often runs less than a year, and the APR calculates the cost of borrowing over a whole year, the APR may appear quite high.

The cents-on-the-dollar cost, on the other hand, communicates how much you are paying in fees per dollar borrowed. Here is an easy way to calculate this number:

total fees / borrowing amount = cents-on-the-dollar

For example, if you are borrowing $10,000, and have a total repayment amount of $12,000, your cents-on-the-dollar cost is $0.20—you will have to pay $0.20 in fees for every dollar borrowed.

The APR and cents-on-the-dollar cost can help you understand the cost of potential funding options and easily compare offers.

Can my business operate under the reduced income?

If you accept a merchant cash advance or short-term loan, you will be operating at a reduced income. Take the time to consider whether or not your business can handle the daily payments. Will you have enough money to pay your other debts? Do you have a safety cushion in the event that your cash flow drops or unexpected expenses arise?

Does the funder offer early payment discounts?

Because short-term funding does not technically charge interest, you cannot save money on interest by repaying early. Some funders, however, do offer a discount on the fee for businesses that repay early. If you think that you are likely to repay before your maturity date, find a funder that offers a discount.

Unfortunately, because merchant cash advances do not have maturity dates, funders do not normally offer discounts on cash advances for any reason.

What is the funder’s policy on late payments?

No business can predict everything that may happen in the future. It’s important to find a funder with a generous late payment policy in the event that you run into unexpected difficulties in your business or personal life and find that you cannot make payments for a time. Many funders are willing to defer payments or work out an alternate schedule if you experience temporary difficulty.

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