How a California Merchant Cash Advance Works
An MCA is technically not a loan — it is a purchase of future revenue at a discount. The lender advances a lump sum today (e.g. $100,000) in exchange for the right to collect a fixed total amount (e.g. $130,000) from your future revenue. The discount factor (1.30 in this example) is the cost.
Repayment happens automatically through one of three structures: 1. ACH pull from your business bank account on a fixed schedule (daily/weekly/monthly) 2. Lockbox arrangement where deposits are routed first to repay the advance 3. Split processing where your card processor sends a portion of each batch to the MCA holder
When an MCA Makes Sense for California Operators
- Speed: when capital is needed in 24 hours and bank approval would take weeks
- Bad credit: when FICO is sub-650 and other products are inaccessible
- Inconsistent revenue: when fixed-payment loans would crush you in slow months
- No collateral: when business has minimal hard assets
- Bank rejection: when you have already been turned down by banks
When an MCA Does NOT Make Sense
- When you have time and credit for a bank or SBA loan at lower cost
- When monthly revenue is so consistent that a fixed-payment term loan is more efficient
- When you have substantial assets that could collateralize a lower-cost product
- When you can negotiate vendor terms or factor receivables more cheaply
MCA Pricing in California
Factor rates in California currently run 1.15–1.49 typical, with stronger profiles getting 1.10-1.20 range and weaker profiles in the 1.35-1.49 range. Term length is usually 3-18 months.
The effective APR on an MCA is generally higher than disclosed factor rates suggest because the repayment schedule is so compressed. A 1.30 factor rate on a 6-month term equates to roughly 60% APR equivalent. Always confirm total dollar cost before signing.