The mechanics
A merchant cash advance is a lump sum repaid from the business's future receipts through frequent small debits, often daily or weekly. There is no single monthly bill; repayment is spread across many small ones. Because debits do not wait for a good week, a business needs to look at its weakest stretch rather than its average when judging whether a payment is livable.
Time-sensitive needs in a fast-moving city
San Jose has been described by Wikipedia as California's fastest-growing metropolitan economy by the early 2000s, and its motto is "Capital of Silicon Valley". Business in that environment is quick: a customer asks for double the order by next month, a landlord needs a deposit for a better unit, a competitor's equipment goes on sale. An advance is sometimes picked because it can arrive faster than a conventional loan.
When it fits and when it does not
| Fits | Does not fit |
|---|---|
| A short, identified opportunity such as a bulk order | Covering an ongoing monthly loss |
| Steady daily deposits (retail, food service, services with regular receipts) | Very lumpy income with long gaps between payments |
| A business that can absorb debits in its slowest week | A business already stretched on payroll or suppliers |
Questions to ask yourself first
- What is the return on this money, and how soon?
- If sales dropped by a fifth for a month, would the debits still be manageable?
- Is there another product that better matches how my revenue arrives? See revenue-based financing and the line of credit.
A worked example, for illustration only
Round numbers, not our terms: a San Jose food producer sees about $12,000 a day of deposits during a trade-show-driven rush and needs $50,000 to buy ingredients and packaging for a large order that will ship in three weeks. For the advance to make sense, the order's margin must exceed the cost of the money by a comfortable amount, and the debits must still leave room for the regular payroll. If the order falls through, the debits continue anyway. That downside scenario is worth thinking through before accepting any offer, including ours.
What to do if an advance already hurts
If you already carry one or more advances and the debits are too heavy, the MCA relief page explains the reverse approach for easing existing payments.
How to apply
We consider FICO scores of 500 and above, ask for about three months of business bank statements and require no tax returns. The application takes about five minutes with a soft credit pull. Funding runs from $25,000 to $5,000,000 and can arrive in as little as 24 hours. Sole proprietors can apply. Apply here, or see the Santa Clara County overview.