Merchant Cash Advance (MCA)
Definition
Upfront cash in exchange for a share of future sales, repaid automatically from daily or weekly receipts. It is fast to get but usually very expensive.
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Formula
Total Repayment = Advance × Factor RateMCAs fill a real gap when banks will not lend quickly, but the cost is easy to underestimate because it is quoted as a factor rate, not an interest rate.
Stacked advances from several providers can drain cash fast. Watch for: daily withdrawals that make cash flow look worse than operations really are, leading to another advance to cover the first.
Example
A $100,000 advance at a 1.3 factor rate means repaying $130,000. If that is repaid in six months, the effective annual cost is far above a bank loan's.