What is a Merchant Advance?

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  • Written By: Mary McMahon
  • Edited By: Kristen Osborne
  • Last Modified Date: 16 February 2020
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A merchant advance is a cash loan provided to a merchant on the basis of future credit card sales. This is a type of loan known as a cash advance that can be used to quickly access cash. However, cash advances can come with significant strings attached, including very high interest rates. Merchants interested in receiving a merchant advance should review the terms and conditions carefully to ensure that they understand what they are getting into.

In a merchant advance, the merchant must provide documentation that credit cards are accepted at the business and provide information about the amount of sales processed each month. Using this information, the lender decides how much cash it can offer. A repayment plan is also established, with many merchant advance providers taking repayment in the form of a percentage of credit card sales.

Merchants need cash to cover payroll, expand, and perform other business operations. A business loan is usually recommended for accessing cash, for a number of reasons including the opportunity to access government assistance programs and potentially low interest rates. Business may not always qualify for business loans or may not be able to wait while a loan application is processed. In these situations, a merchant advance may be viewed as a better option because it is processed quickly.


Businesses in need of quick financing can be in a vulnerable position. They need cash, but there is a risk that they could end up in trouble in the future if they take out high interest loans or loans that have very unfavorable repayment terms. As with any type of loan, some shopping around should be done before applying for a merchant advance to find the best rates and terms. Otherwise, a business may end up locked into a contract that will be difficult to repay.

Numerous companies offer merchant advances along with other types of cash advances. It is usually possible for find company websites with information about the types of loans they offer along with the terms and conditions of their loans. Because cash advances are a specialty loan product, it may be challenging to find a broker who handles this type of loan and businesses must negotiate with the lenders themselves. However, it may be worth contacting a broker to get information about borrowing options, as there may be other types of loans available that could be considered along with a merchant advance.



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