What is a Merchant Cash Advance and How Does It Work?

What is a Merchant Cash Advance?

When you receive a merchant cash advance, a direct funder like Workable Funding provides you with a lump sum of capital upfront. In exchange, you agree to repay that amount — plus a cost called a factor rate — through fixed daily, weekly, or monthly payments automatically debited from your business bank account.

The key word is fixed. Your repayment amount does not change based on how your sales are doing. You agree to a set payment schedule at the time of funding and that schedule stays consistent for the length of your term.

How Does Repayment Work?

MCA repayment is straightforward. Here is an example:

You receive $100,000 from Workable Funding at a factor rate of 1.28. Your total repayment amount is $128,000 — that is your funding amount multiplied by the factor rate. That $128,000 is then divided across your repayment schedule.

If you choose daily repayment over 12 months (approximately 264 business days), your daily payment would be approximately $485. If you choose weekly repayment, your weekly payment would be approximately $2,424.

There are no prepayment penalties at Workable Funding. If you pay off your advance early, you pay off the remaining balance — nothing more.

What is a Factor Rate?

A factor rate is the cost multiplier applied to your funding amount to determine your total repayment. Factor rates are expressed as decimals — typically ranging from 1.15 to 1.49 depending on the strength of your business profile.

A factor rate is different from an interest rate. Interest rates accrue over time — the longer you take to repay, the more you pay. A factor rate is fixed at the time of funding. Whether you repay in 6 months or 18 months, your total repayment amount stays the same.

Quick examples: $50,000 at a 1.20 factor equals $60,000 total repayment with a cost of capital of $10,000. $100,000 at 1.28 equals $128,000 total with $28,000 cost. $250,000 at 1.35 equals $337,500 total with $87,500 cost.

Who is a Merchant Cash Advance Best For?

An MCA is an excellent fit for small business owners who need capital quickly, who may not qualify for traditional bank financing, or who want a simple repayment structure without the complexity of a term loan.

MCA funding works particularly well for restaurants, retailers, contractors, trucking companies, medical practices, beauty salons, auto repair shops, and virtually any other business with consistent monthly revenue of $15,000 or more.

It is especially powerful when you need to move fast — purchase inventory before a busy season, cover payroll during a slow month, fund an equipment repair, or seize a growth opportunity that cannot wait for a bank's 60-day review process.

What are the Pros and Cons?

Pros: Fast approval and funding — often within 24 hours. No collateral required in most cases. Approval based on revenue, not just credit score. Fixed repayment that is easy to budget around. All industries welcome. No hard credit pull to check eligibility.

Cons: Higher cost of capital compared to traditional bank loans. Fixed payments regardless of business performance. Not ideal for businesses with very low monthly revenue. Not a revolving line of credit — each advance is a separate transaction.

How to Apply with Workable Funding

Applying for an MCA with Workable Funding takes approximately 2 minutes. You will need your basic business information, 3 months of business bank statements, and a government-issued ID. There is no hard credit pull to get started and no obligation to accept an offer.