If you are a small business owner and you need capital right now, a merchant cash advance- or MCA- may sound like a great option. However, before you do this, you should understand that it could cost you.

It’s important to note that typically, an MCA will have an annual percentage rate in the triple digits. These fees, as well as the repayment schedule, can put a dent in your cash flow. Sometimes, an MCA can lead to a debt trap where it’s almost impossible to pay off and you end up in an endless cycle of refinancing your MCA or end up filing bankruptcy.

In this blog, we’ll explain the advantages and disadvantages of using an MCA to solve your need for capital. This should help you make a wise decision regarding financing.

What is an MCA?

An MCA is an alternative to traditional small business loans. However, it is technically not classified as a loan. The MCA provider will give you an upfront sum of cash in exchange for a portion of your sales.

How does an MCA work?

Historically, MCAs are for businesses that get most of their revenue from credit/debit card sales. Now, they are available to other businesses as well. Repayments can be structured in the following two ways:

MCA provider gets a portion of your future credit/debit card sales
MCA provider gets daily/weekly debits from your bank account

Advantages & Disadvantages of MCAs

There are several advantages and disadvantages of MCAs. We’ll outline those below:


There are some advantages, such as:

The process is quick
You don’t need any physical collateral
If sales are down, payment may be reduced


There are some disadvantages as well. We’ll explore those below.

  • High (triple-digit) APR
  • High sales equal high APR
  • No benefit to early payoff
  • No federal oversight
  • Credit score may be pulled
  • The danger of getting caught up in debt-cycle
  • Confusing contracts


When a small business needs cash fast, they often look to an MCA as a good option. Nonetheless, the advantages and disadvantages should be weighed carefully. Contact Aspen Capital Solutions to learn more about whether an MCA is right for your business.