Test Your Knowledge About Merchant Cash Advances (MCA) with Our Quiz!

A merchant cash advance (MCA) is not a loan but rather an advance based on the credit card sales deposited in a business's merchant account. MCA providers evaluate risk and credit criteria differently than traditional lenders and look at daily credit card receipts to determine if a business can repay the advance in a timely manner. Repayments can be structured in two ways, either by exchanging a portion of future credit and debit card sales or by remitting fixed daily or weekly debits from a bank account. Fees are determined by the provider's risk assessment and factor rate, which can range from 1.2 to 1.60, and are multiplied by the cash advance to determine the total repayment amount. MCAs are quick, unsecured, and do not require strong credit. Holdback refers to the percentage of daily credit card sales applied to the advance until it is fully repaid. The holdback amount is not the same as the interest rate, which is charged separately by the MCA provider.