Merchant cash advance
Compare merchant cash advances, and what they really cost
A lump sum for businesses that take card payments, repaid automatically as a share of your daily card settlements.
An enquiry is a conversation, not an application. We won't submit anything to a lender without your say-so.
The basics
How does a merchant cash advance work?
You receive a lump sum upfront. In exchange, an agreed share of every day's card settlements goes to the provider automatically until the agreed total is repaid. There is no fixed monthly repayment and, strictly, no fixed term: the repayments track your takings, so the busier you are, the faster it clears.
Two things follow. What is assessed is your card turnover, not your assets, which is why an advance is available to businesses a bank will not look at. And because the repayment is a share of takings, a quiet fortnight means you repay less, with no missed payment on your file. The catch is the price: an advance is not priced with an interest rate but with a fixed fee, usually a factor rate, which fixes the total you will repay before you make a single repayment. Understanding that one mechanic is the next section.
Reading the price
What is a factor rate, and why can't you compare it to an interest rate?
A factor rate is a multiplier applied once to what you are advanced: it fixes the total you will repay on day one. An interest rate is a charge per unit of time on a balance that falls as you repay. The two cannot be compared directly.
The one-line version: a factor rate is a distance, an interest rate is a speed. You cannot say which is bigger until you know how long the journey takes. Comparing a factor rate to a bank's advertised annual rate side by side is not comparing two prices, it is comparing two units, and that mistake has probably cost Australian small businesses more than any other number on a finance quote.
Factor rate
- A multiplier applied once to the advance.
- Fixes the total repayable on day one, in dollars.
- Repaying sooner does not reduce the total.
- The share of daily takings sets the speed, not the cost.
Interest rate
- A charge per unit of time.
- Applied to a balance that falls as you repay.
- Repaying sooner generally reduces what you pay.
- Quoted as an annual percentage.
The bottom line: multiply the advance by the factor rate and you have the total you will repay, fixed at the start. The only figure worth comparing across offers is that total repayable in dollars, so always ask whether fees sit on top of the factor.
A worked example, with invented numbers
The numbers below are invented to show the arithmetic. They are not observed from any provider, not typical of anything, and not what you would be quoted: your numbers come from a provider's offer on your file.
Suppose a provider advanced $40,000 at a factor rate of 1.25. The total repayable is $40,000 multiplied by 1.25, which is $50,000, fixed on day one before a single repayment happens. The cost of the money is $10,000, and it stays $10,000 whether the advance clears in four months or fourteen. That is the factor-rate mechanic in one line: repaying faster changes when it is finished, never what it costs. Always ask whether fees sit on top of the factor, because they raise the total the same way.
Now add the second lever, again invented: a holdback of 10%. If the terminal takes $2,000 a day, $200 a day goes to the provider, and $50,000 divided by $200 is 250 trading days. Halve the takings to $1,000 a day and the daily share halves to $100, so the window doubles to 500 trading days, and the $50,000 total does not move. Distance and speed, exactly as the section above says: the factor rate set the distance at $50,000, and the holdback and your takings set nothing but how fast you cover it.
This is also step 3 of the four-step method below, run once on invented numbers. Run it again with the real figures from any offer in front of you, and you have the only comparison that means anything.
The method says to run your numbers twice, a good season and a quiet one. Here is what that looks like on the same invented example:
| Season (invented figures) | Daily card takings | Daily share at 10% holdback | Trading days to repay | Total repayable |
|---|---|---|---|---|
| Good season | $2,500 | $250 | 200 | $50,000 |
| Quiet season | $1,250 | $125 | 400 | $50,000 |
The right-hand column is the honest case for this product and its honest warning in one number. Repayments genuinely flex when trade is quiet, with no missed payment on your file, and the price of that flexibility is a total that never gets cheaper. Whether that trade is worth it for your business is the decision, and it is yours to make with the total in writing.
Turn any offer into a number you can compare
Four steps, doable at the counter with the offer in front of you. It works on any advance from any provider.
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1
Ask for the total repayable, in dollars, in writing.
Not the factor rate and not the daily share: every dollar that will leave your business before this is finished, fees included. If a provider will not put that number in writing, you have learned something important.
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2
Subtract the advance from it.
What is left is the cost, in dollars. That is the real price of the money, and the only figure that means the same thing across every offer.
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3
Work out how long it will take, on your own numbers.
Total repayable divided by the share of takings the provider holds, multiplied by your realistic average daily card sales, gives the number of trading days. If your trade is seasonal, run it twice: a good season and a quiet one.
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4
Compare on the same two axes.
You now have a cost in dollars and a window in weeks. Ask an unsecured lender for total repayments in dollars over that same window, not the rate. Fewer dollars over the same period is cheaper.
If you take one thing from this page, take step 1. This is exactly what we do on every advance we look at, against the alternatives at the same time.
Merchant cash advance vs unsecured loan vs line of credit
All three put money in your account without an asset pledged. They differ in how they are priced and what the repayment tracks. An advance is a fixed fee repaid from card takings. An unsecured loan is an interest rate on a fixed schedule. A line of credit is interest on what you draw, plus a fee. Per dollar borrowed, the advance is generally the dearest of the three.
| Feature | Merchant cash advance | Unsecured business loan | Line of credit |
|---|---|---|---|
| How it is priced | A fixed fee, usually expressed as a factor rate | An interest rate, per annum | Interest on the drawn balance, plus a line or service fee |
| Is the total cost fixed at the outset? | Yes. It does not move | No. It falls if you repay early, subject to any early-repayment fee | No. You pay for what you draw, when you draw it |
| What repayments track | Your daily card settlements | A fixed schedule, regardless of trade | Your drawn balance |
| Term | No fixed end date. Your takings set it | Fixed, agreed upfront | Ongoing, while the limit is in place |
| What is assessed | Card turnover history | Trading history and revenue | Trading history and revenue consistency |
| Asset security | Generally not the basis of the assessment | Generally none | May be secured or unsecured |
| Reusable without reapplying? | No | No | Yes, up to your limit |
| Cost per dollar borrowed | Generally the dearest of the three | Generally below an advance | Depends on how much you draw and for how long |
| Best suited to | Card-heavy trade, a short-term need, and a genuine need for repayments that flex | A known, one-off cost with a clear payback | A gap that recurs and cannot be predicted |
Pricing, structures and availability vary by provider, by lender and by facility. The table describes how the three products generally work, not the terms of any particular offer.
Weighing an advance against an unsecured loan specifically? The full two-way comparison is at merchant cash advance vs business loan.
Why is an advance dearer, and when is it still the right call?
Why it costs more is not a mystery and it is not a criticism of the providers. Money is priced on risk and on time. An advance carries no asset security, it is assessed on takings rather than a full credit file, it is repaid over a short window, and the provider is accepting that if your trade falls away it waits longer for its money with no right to a fixed payment. That is more risk, held for less time, than a secured term loan. It costs more per dollar. Any product built that way would.
When an unsecured loan does the same job for less. If the need is a known, one-off cost with a clear payback, an oven, a fit-out, a stock buy for a peak you can see coming, then you are not buying flexibility, you are buying money. A fixed schedule is not a problem for a business that can meet it. In that situation an advance usually means paying a premium for a feature you will not use. That is the most common mistake on this product, and if it describes you, we will say so and point you at an unsecured business loan instead.
When the flexibility is genuinely worth the premium. When your takings are volatile enough that a fixed repayment is a real risk, not a theoretical one. A seasonal business, a venue whose trade moves with the weather, a retailer whose quarters are nothing alike. If a bad month means you cannot make a fixed payment, the advance's structure is not a gimmick: it is the difference between a quiet month and a default. Paying more for that is a rational decision, and it is your decision to make once you can see what it costs.
When it is the only thing available. Sometimes that is the honest situation, and we are not going to pretend otherwise. If the bank has said no and the advance is the option in front of you, the useful thing we can do is make sure you are taking the best version of it and that you know the number before you sign, not tell you that you should have been someone else. Read section 3 first, and get the total in writing.
When you should not take one at all. If you are taking an advance to keep up with an advance you already have, stop. That is not a funding gap. See section 6.
For the two-way version of this decision, with the method laid out step by step, see merchant cash advance vs business loan.
How it works with a broker
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You send us the statements.
Your recent merchant statements do most of the talking on this product, because they are what providers assess. Add what the money is for and how soon you need it, and that is the conversation.
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We compare the panel, and the alternatives.
We take your file to the providers with appetite for it, and we price an unsecured loan and a line of credit at the same time. Every offer comes back to you as a total in dollars, not as a factor rate, next to the alternatives on the same axes.
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You choose, with the number in front of you.
Including the option of choosing none of it. If a cheaper product does the same job, we will tell you, and we will tell you why. If the advance still wins on flexibility, at least you are choosing it with the full picture.
What providers typically look for
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Card takings through a terminal*
This is the assessment. Not your balance sheet, not your assets: what comes through the machine, how much of it, and how consistently.
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Recent merchant statements*
The single document that does the most work in an application on this product. Have them ready and the conversation is short.
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A trading history*
Most providers want to see the business trading for a minimum period, because they are forecasting your takings from your takings. That minimum differs by provider.
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An active ABN*
Some providers also want GST registration. It depends on the provider.
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Your terminal or payment provider*
It can matter. Repayment is collected out of your settlements, so how your terminal and settlement arrangements work can affect which providers will look at you and how the mechanism is set up. Worth mentioning early rather than at the end.
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Any advances you already have*
Providers ask. If you are carrying one, a second is a different conversation, and it is one worth having carefully. See below.
On card 6, plainly. Taking a second advance to service the first is the single most reliable way a business gets into trouble on this product. Each one takes its share of the same takings, and the shares stack, so the day comes where the terminal is funding the advances instead of the business. If that is where you are, the next conversation is not another advance. It is business debt consolidation, or your accountant, and we would rather have that conversation with you than arrange the thing that makes it worse.
Who it suits
Strong card sales, but no assets a bank wants to see?
An advance suits businesses whose money arrives through a terminal: cafes, restaurants, bars, retailers, salons. Card-heavy, asset-light, and often trading well while being exactly the shape a bank does not lend to. If your revenue is card settlements and your balance sheet has nothing on it a bank wants, this product was built for you.
Read more
The fit is at its best when three things are true at once: your takings come through the terminal, they move around enough that a fixed repayment is a genuine risk, and the money is for something with a payback you can see. A repair that has stopped you trading. A stock buy for a peak that is coming. Covering a quiet stretch you know ends.
Three sketches (imagined, not clients)
These are hypothetical shapes, not case studies, and none of them promises any outcome.
- A cafe near a university, where takings drop hard outside semester. A fixed repayment sized for March would be a problem in July; a repayment that tracks the terminal is not.
- A live-music venue whose fortnights swing with bookings and weather. The flexibility is not a nice-to-have, it is the difference between a quiet fortnight and a missed fixed payment.
- A coastal retailer that does a large share of the year's trade across summer. An advance taken before the season, for stock with a visible payback, clears fastest exactly when the tills are busiest.
In all three, the sketch only makes sense if the arithmetic above is run first, on real quoted numbers, against an unsecured loan and a line of credit priced at the same time. That comparison is what we do.
Who it is not for, which is the more useful list.
If you invoice your customers on terms, this is not your product. An advance is repaid from card settlements. If your money arrives as a bank transfer thirty or sixty days after you have done the work, there is nothing for the mechanism to attach to, and invoice finance is the product that funds exactly that gap. This is the most common misfit we see.
If the need is a one-off with a known cost, price a loan first. You are not buying flexibility, so do not pay for it. An unsecured business loan generally prices below an advance and does the same job.
If the gap keeps coming back, you want a limit, not an advance. An advance is a one-off that has to be reapplied for. A line of credit sits there and you draw on it when you need it, then repay it and draw again, without going back to the start each time.
And if you are already carrying an advance and looking for another to cover it, that is the one case where we will not help you do what you came here to do. See section 6.
Industries
Industries we help fund
Whatever you do, the finance that fits depends on how your business actually trades. These are some of the industries we arrange funding for, each with its own guide.
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Agriculture & farming
Machinery, utes, inputs bought a season ahead, and repayments that can follow the harvest.
Agriculture finance -
Hospitality & cafés
Fit-outs, commercial kitchen gear, stock before the rush, and the quiet months in between.
Hospitality finance -
Retail & e-commerce
Buying stock before the season sells, fit-outs, and bridging supplier terms against your sales.
Retail finance -
Trades & construction
Tools, vehicles, materials up front, and bridging the gap between doing the work and being paid.
Trades & construction finance -
Health & allied health
Practice fit-outs, clinical equipment, hiring, and opening a second set of rooms.
Health finance -
Professional services
Hiring ahead of billings, office and technology, and bridging project-based invoicing.
Professional services finance -
Transport & logistics
Trucks and trailers, running costs, and carrying the gap between delivery and payment.
Transport & logistics finance
Customer stories
What business owners say about 121 Brokers
Testimonials reflect individual customers' experiences. Outcomes vary and depend on the lender and your circumstances.
121 Brokers Pty Ltd (ABN 37 674 323 712) is a finance broker, not a lender. We arrange finance through third-party lenders. Approval, interest rates, fees, timing and the funds themselves are set and provided by the lender, not by 121 Brokers.
FAQs
Merchant cash advance questions, answered straight
How much can my business get?
Providers scale an advance to your card turnover, because that is both the security and the repayment mechanism. Strong, consistent takings support more than thin or erratic ones. The amount, and whether there is one at all, is the provider's call on your merchant statements. We can tell you what your statements are likely to support before you apply.
There is no fixed answer we could give you here that would survive contact with your actual numbers. What is worth knowing is that the question is answered almost entirely by the terminal: not by how long you have been trading, not by what the business owns, and not by what you want the money for.
Do I need security or a good credit score for a merchant cash advance?
The assessment is built on your card takings rather than on assets, which is why this product exists for businesses a bank will not look at. Credit history is usually part of the picture rather than the whole of it. What any individual provider requires, and how much weight it puts where, is that provider's call.
Be careful with what that means, though. "Assessed on takings" does not mean nobody is standing behind it: expect a director guarantee to be part of the conversation, as on most business facilities. And no legitimate provider guarantees approval to anyone, whatever a search result says. If you are seeing that promise, that is the thing to be suspicious of, not the credit check.
Can I repay a merchant cash advance early?
Usually you can, in the sense that nothing stops you clearing the balance. The question people are really asking is whether it saves money, and where the total repayable was fixed at the start with a fixed fee, it generally does not. An advance does not behave like a loan here. See the factor rate section above.
Ask the provider directly, in writing, before you sign: is there any discount, rebate or reduction of the fee if the advance is cleared early? Get the answer either way. It is one of the questions we ask on every advance we look at, and it is the one most likely to be answered vaguely if you do not ask it precisely.
Flexible funding, priced with your eyes open.
Send us your recent merchant statements. We will show you what an advance would really cost, in dollars, next to what an unsecured loan or a line of credit would cost over the same window. Then you decide, including deciding against all three.
An enquiry is a conversation, not an application. We won't submit anything to a lender without your say-so.