Is a merchant cash advance a loan?
No. A merchant cash advance is the purchase of a fixed amount of your future receivables at a discount, not a loan. There is no interest rate and no fixed maturity date — the funder buys $130,000 of future sales for $100,000 today and collects it as a share of daily deposits.
Start an applicationThe distinction is legal, not cosmetic. A loan creates an absolute obligation to repay on a schedule. An advance is a purchase: the funder takes on the risk that the receivables never materialise. That risk transfer is why the product is not priced or regulated as lending, and it is why the paperwork says purchased amount, remittance and turn rather than principal, payment and term.
The cost is expressed as a factor, not a rate. At a factor of 1.30, $100,000 advanced creates a $130,000 purchased amount. The factor is flat and time-blind — the dollar cost is identical whether the balance clears in four months or fourteen. This is the single most misunderstood feature of the product, and the reason a factor cannot be compared to a bank's annual rate without converting it first.
The clause that holds the whole structure together is reconciliation: a genuine, usable right to have the remittance adjusted when sales fall. Where that right is absent or unusable in practice, courts have recharacterised advances as loans. Read it before signing, and be wary of anyone describing the product as a loan while selling it as an advance.
What secures each product
Figures are typical ranges for a complete file, not guarantees. Final terms depend on revenue, time in business, credit profile and lender review.
| Merchant Cash Advance (MCA) | Unsecured |
|---|---|
| Business Line of Credit | Often unsecured |
| Invoice Factoring | A/R is the collateral |
| Equipment Financing | The equipment |
| Bridge Loan | Usually asset-backed |
| Term Loan | Sometimes |
| Inventory Financing | First charge on inventory + PG |
| Acquisition Financing | Target assets + PG |