Key Takeaways:
- A Merchant Cash Advance (MCA) allows retail businesses to repay the loan based on future sales via EFTPOS. If sales are high, repayments are faster; if sales are low, repayments adjust accordingly, reducing financial pressure.
- The application process for an MCA is fast and straightforward, with approval possible in as little as 2 hours. Unlike traditional loans, there’s minimal paperwork and no need for collateral.
- MCA lenders focus more on the business’s cash flow and sales history rather than the owner’s credit score, making it a viable option for businesses with limited assets or lower credit ratings.
Running a retail business means cash flow can swing wildly from week to week. If most of your sales come through EFTPOS, a merchant cash advance (MCA) could give you the breathing room you need—without jumping through hoops.
Let’s dive in and find out whether you could use one to your advantage.
What is a merchant cash advance?
Think of a Merchant Cash Advance as a cash injection now, paid back through your future sales. It’s not a loan in the traditional sense—there’s no set repayment amount, no fixed term, and no need to offer up collateral.
Instead of interest, you’ll pay what’s called a “factor rate”—a fixed cost added on top of the advance. It’s how lenders make their money.
Repayments are automated and scale with your turnover. The more you sell, the faster you repay—which is why MCAs work best for retail businesses that make lots of EFTPOS sales.
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How does a merchant cash advance work?
Your chosen lender will give you an upfront lump sum payment known as an advance, you’ll pay the money back with an agreed-upon percentage of your future sales.
As we mentioned before, lenders make their money through a factor fee. So, when your customer makes a purchase via your EFTPOS machine, a percentage of that payment will be given to your lender.
You’ll continue to make repayments this way until your advance is paid off in full.
When you apply for an MCA, your lender will determine the percentage you’ll pay of each transaction. They’ll make this decision based on the health of your business and previous sales history.
The higher your monthly turnover, the better. And the more sales you make, the faster you’ll pay off your MCA.
Common uses for a merchant cash advance
- Stock up ahead of a busy season
- Fund marketing campaigns to boost sales
- Renovate or upgrade store equipment
- Cover short-term gaps when cash flow’s a little wobbly
The benefits of a merchant cash advance
Collateral isn’t usually required
Unlike traditional loans, most MCAs don’t require you to back the funds with business or personal assets.
Lenders care more about your cash flow than what you own—so you won’t need to risk your van, your stock, or your equipment to get funding.
Your credit score isn’t make-or-break
With a merchant cash advance, less emphasis is placed on your credit score as lenders are more concerned with the stability of your cash flow.
That’s not to say your credit score will have no impact, but there tends to be more leniency and looser criteria for approval.
Quicker approval process
One of the biggest perks is that MCAs are fast. Really fast. Most lenders can approve you in a few hours, with minimal paperwork.
Most of the time, you won’t even be required to put any assets on the line—lenders are more concerned with your cash flow and number of sales.
Repayment amount adjusts to your business revenue
Merchant cash advances are handy in that they adjust to your business’s revenue at any given time, which can help eliminate cash flow issues.
If your business is busy pumping out sales, you’ll pay your loan off sooner, and if you face a dry spell, you won’t have to worry.
The drawbacks of a merchant cash advance
Could be more expensive than traditional loans
MCAs tend to cost more than traditional loans—the trade-off for speed and flexibility. So it’s worth weighing up whether fast access is worth the extra price tag.
Limited borrowing amounts
Most lenders will let you borrow up to your average monthly card turnover, but it depends on who you go with.
There's an element of uncertainty
Sure, past turnover looks good on paper, but things can change fast. That’s business.
While unlikely, if you do default on your MCA or become unable to meet your repayments on time, you might end up scrambling to cover repayments.
In saying this, any form of finance (and running a business, period) comes with an element of risk. That’s standard—what matters is knowing the risks so you can weigh them properly.
If you're after peace of mind, a third-party provider might be the safer bet
If you have a PayPal loan, for instance, you’re tying your credit to a means of obtaining revenue. If you have a dispute with your credit provider, they could restrict your account, harming your ability to get revenue.
On the other hand, a third-party credit provider could be the safer option, as you won’t be impacted in the short term if you run into any issues.
Who's eligible for a merchant cash advance?
Every lender’s different, but they’ll usually look at how steady your sales are, as well as business age and turnover consistency.
The good news is, you don’t need any assets upfront, and your credit history will hold less weight as a deciding factor, since lenders are more concerned with your cash flow.
How quickly can I get a merchant cash advance?
MCAs can be approved in as little as 2 hours, with minimal paperwork, making them a great option if you need quick access to cash.
While secured loans generally come with lower interest rates, they can take months to approve—not ideal for businesses that need funding quickly to solve unexpected problems.
Is a merchant cash advance right for me?
Merchant cash advances are not for all businesses. If you have multiple revenue streams, a merchant cash advance might not suit, but those who receive most of their turnover through EFTPOS terminals could benefit.
Plus, not all lenders will work with all card terminal suppliers, so it’s best to check with your chosen lender whether they accept the technology you currently use.
Alternatively, a lending expert at Valiant can find a lender who matches your needs and take care of the application process on your behalf.
Differences between merchant cash advances and other business loans
One of the biggest differences between a MCA and a traditional business loan comes down to how repayments are structured.
Business loans typically have fixed monthly repayments that kick in straight away, regardless of how your business is performing. That can put pressure on cash flow—especially during slow periods.
An MCA, on the other hand, takes a percentage of your daily EFTPOS sales, so repayments naturally scale with your revenue.
The application and approval process is also simpler with an MCA. We explained it before: most lenders won’t ask for collateral, lengthy financials, or a perfect credit score. Instead, they focus on your business’s sales history and cash flow.
That said, MCAs can be more expensive overall. They come with factor fees, shorter repayment terms, and usually lower borrowing limits—often around your average monthly card turnover.
Traditional loans might offer higher amounts at a lower cost, but they’re harder to qualify for and take longer to process.
Merchant cash advance FAQs
Can I pay off my MCA early?
Yes, some lenders allow early repayment, but it may come with additional fees or conditions. Always check the terms before signing.
Does an MCA affect my credit score?
Since MCAs are based on sales and cash flow, they generally have less impact on your credit score than traditional loans. However, failing to repay could negatively affect your credit.
Can I get an MCA if I’m a startup or have poor credit?
Some lenders may work with startups or businesses with poor credit if they have strong EFTPOS sales history. Eligibility varies, so it’s best to discuss your situation with a lending expert.
