A merchant cash advance (MCA) gives your business a lump sum of capital today, repaid automatically as a percentage of your future card and EFTPOS sales. For Australian businesses with strong daily takings but limited assets to secure a traditional loan — cafés, retailers, hospitality — it can be one of the fastest ways to access working capital. It’s also one of the more expensive, so it pays to understand the real cost before you sign.
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What is a merchant cash advance?
An MCA isn’t technically a loan — it’s the purchase of a slice of your future revenue at a discount. A provider advances you a lump sum, and you repay it (plus a fee) by remitting an agreed percentage of your daily card sales until the total is cleared. When sales are strong you repay faster; when they’re quiet you repay less. That flexibility is the main appeal.
Because repayments flex with revenue and approval leans on your sales history rather than assets, MCAs suit businesses that turn over a lot through card terminals but wouldn’t qualify for — or can’t wait for — a secured business loan.
How it works in Australia
- You apply with recent bank statements and merchant terminal data (usually 3–6 months).
- The provider assesses your daily card turnover and offers an advance amount, typically $5,000 to $500,000.
- You agree a factor rate and a holdback — the percentage of daily sales that goes to repayment.
- Repayment is automatic, drawn from your merchant facility or bank account each day until repaid.
Approval is often within 24–48 hours, and funds can land the same week — far faster than a bank term loan.
What a merchant cash advance really costs
This is where care matters. MCAs are priced with a factor rate, not an interest rate. If you take $50,000 at a factor rate of 1.3, you repay $65,000 — a $15,000 cost regardless of how quickly you repay. Because there’s no benefit to early repayment, the effective annual rate can be very high, especially if the advance is cleared in a few months.
- Factor rates typically range from about 1.1 to 1.5.
- No security required in most cases, which is part of why the cost is higher.
- Watch the holdback percentage — too high and daily cash flow gets tight fast.
Always convert the factor rate into a total dollar cost and compare it against a short-term business loan or business line of credit before committing.
When an MCA makes sense (and when it doesn’t)
Good fit: strong, consistent card sales; a genuine short-term opportunity (stock, a quiet-season bridge, urgent equipment); no assets to secure cheaper finance; you need money in days, not weeks.
Poor fit: thin margins that can’t absorb the factor cost; irregular card sales; a need you could plan for with cheaper finance; using it to cover an ongoing shortfall rather than a one-off (that’s a warning sign the business has a deeper cash-flow issue).
Alternatives worth comparing first
Because MCAs are costly, check cheaper options first:
- Short-term business loans — fixed term, often cheaper for a one-off.
- Business line of credit — flexible, draw-as-needed, only pay for what you use.
- Invoice finance — if the cash you need is tied up in unpaid invoices.
- Business overdraft — a revolving buffer attached to your account.
Business funding guides
- Business Loans in Australia: the complete guide — start here
- Business line of credit
- Short-term business loans
- Invoice finance
- Equipment finance
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Frequently asked questions
Is a merchant cash advance a loan? Not legally — it’s the sale of a portion of your future sales, which is why it isn’t regulated the same way as a business loan and why approval is faster but costs more.
How much does a merchant cash advance cost? Cost is set by a factor rate (roughly 1.1–1.5). A $50,000 advance at 1.3 means repaying $65,000. Convert it to a dollar figure and compare against a term loan.
Can I get an MCA with bad credit? Often yes — providers weight your card sales history more heavily than your credit score, so consistent turnover matters most.
How fast can I get funded? Frequently 24–48 hours to approval, with funds within days — one of the fastest business funding options available.
The bottom line
A merchant cash advance trades cost for speed and flexibility. If you have strong card sales, no assets to pledge, and a genuine short-term need, it can bridge the gap fast. But convert the factor rate to real dollars and compare it against cheaper finance first — used for an ongoing shortfall rather than a one-off, it gets expensive quickly.