Business Cash Advance Loans

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Merchant Cash Advance Loans

What is a Merchant Cash Advance?

Most businesses now process their payments online through a payment processor, whether that be the card machine you use in your in-person store or a processor linked to your online store, such as Stripe or PayPal. These payment processors have unique insight into your business because they know exactly how much money you make, and so are often more willing to lend you money. When they do, this is called a Merchant Cash Advance.

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What is a merchant cash advance?

A merchant cash advance is a loan you get through your payment processor. In most cases, they offer their successful customers a merchant cash advance which can then be borrowed as a lump sum to pay for business expenses (ideally those that help you grow) and then is paid back through the payments you take from your customers.

How do merchant cash advances work?

Let’s look at how merchant cash advances work through this example: if you generally make $10,000 a month through your payment processor, they may offer you an advance of $20,000. You decide you can afford to pay it back quickly, so you choose to pay it back via 20% of all the payments you receive.

For the next few months, 20% of all the payments you receive will go to repaying the $20,000. In most cases, merchant cash advances have a fixed fee for borrowing the money, though you may find one that charges interest on the amount you’ve yet to pay back. They also usually have a minimum repayment, either monthly or every 90 days, so if for any reason you don’t make any money through them, you simply need to pay at least that minimum to maintain the loan.

What can you use a merchant cash advance for?

You can use a merchant cash advance for any business purpose – it acts a lot like a term loan, so there are no rules about how you use the cash. That said, the most popular ways to use a merchant cash advance are:

  • To boost your working capital
  • To invest in new equipment or software
  • Help smooth cash flow (which can be turbulent for product-based businesses)
  • Invest in new inventory
  • Invest in a new asset (such as an online store or another location)
  • Pay off debts elsewhere to avoid interest
  • Pay for an expensive service to grow your business or repair something on your premises

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Kabbage Business Loan Review


Funding: Borrow $1,500 - $150,000
Minimum Credit Score: 640
Loan term: 6, 12 or 18 months
Funding turnaround: As soon as 1-3 business days

Kabbage offers borrowers a credit line up to $150,000 with monthly repayment options and no prepayment penalties. Approval as fast as same business day.

FundBox Business Loans


Funding: Borrow $2,500 - $150,000
Minimum Credit Score: 600
Loan term: 12-24 months
Funding turnaround: as fast as next business day

Fundbox requires minimal documentation and access to a revolving line of credit without origination or maintenance fees. Borrowers are not required to have collateral (with exception of larger credit lines which are subject to a personal guarantee).

What are the pros and cons of merchant cash advances?


  • Most of the time, your payment processor doesn’t care about a credit check because they’re well aware of your trading history so there will be no credit check
  • You’re often pre-approved, so you won’t be able to apply for more than they’re willing to lend you
  • You can set the percentage you pay back, so you don’t need to worry about finding the loan unaffordable (provided you’ve done your math and know your business will continue to be successful)
  • Minimum payments are generally very low, so if something unusual happens, you’ll be able to cover the minimum with no trouble
  • You don’t often have a set date you must pay it back by
  • You can often pay them off within months of borrowing, and then borrow again when you need to – for businesses doing a lot of transactions, they essentially pay themselves off
  • You usually get funded within 24 hours of applying
  • You don’t need to put up anything as collateral
  • If you make less one month, you will pay less that month


  • You can be tempted to borrow money when you don’t really need it
  • Your borrowing ability is limited by how much you make through that payment processor, so if your income streams are diverse you may not be able to borrow as much as you need
  • They can be an expensive way to borrow – though some lenders are better than others
  • If your business takes a downturn, you may not be able to utilize all the money you’re making because a percentage of every sale will still be going to pay back the loan

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Merchant cash advance vs business loans: What’s the difference?

There’s not a huge difference in the way you can use them, but there are a few key differences in how you borrow the money and how you pay them back.

For a business loan, you need to apply to a lender you likely have no prior history or relationship with and ask them to lend you money based on your personal credit score, business bank statements, and other documents they need. If you are approved, you’ll receive a lump sum and pay it back over a fixed term, paying the same amount each month, regardless of how your financial situation changes.

A merchant cash advance rarely requires a credit check (because they can already see how much you make, or you can prove it to them) and you pay back the loan as you make money. This means that you often pay more each month than you would for a standard business loan, but you will also be debt-free faster. That said, some merchant cash advances have high fees (though not all) and you often can’t borrow as much as you can through a standard business loan.

What type of businesses should consider a merchant cash advance?

Any business that regularly takes card payments as a form of payment can consider a merchant cash advance to help boost their working capital. This means that any brick and mortar store or online store is eligible, as well as many in-person and online service businesses. A merchant cash advance can be a great way to borrow if you make most of your sales this way, as it’s easy to prove how much you make.

Can startup businesses obtain a merchant cash advance?

If you are a brand new startup, then no, it’s not going to be possible. A merchant cash advance works on the basis that you can prove that you regularly make money through online payments, so if you don’t yet have a trading history, you have no way to prove you’ll be able to pay it back.

Is a merchant cash advance right for your business?

A merchant cash advance may be right for you if:

  • You take a large portion of your payments through a payment processor
  • You have a history of reliable income for at least the past 6 months (most look for 1-2 years in business)
  • You are looking to borrow an amount you know you’ll be able to pay back in the next 12 months or so

How to get a merchant cash advance

If you’re looking for a merchant cash advance, your first step should be to check with your current payment processor to see if they’re willing to offer you one. If they don’t, or they aren’t offering you the kind of terms you’re looking for, then you may be able to find a lender who is.

Compare best merchant cash advance lenders by comparing financing options online. You can obtain flexible terms by gathering proof of your card transactions, and applying to the lender that will provide an advance best suited for your situation.

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