What is Merchant Money

Merchant money, or better know as a merchant cash advance is a type of business financing option that is usually done in short payment terms and in small amounts that are usually paid on a daily basis. It is generally not considered a loan, but it is a form of payment made in advance against the future income of a business.

The payment made is called a retrieval or holdback rate.

This is based on the money given, the length of payment and the daily credit card or debit card sales. The holdback rate can be at 5% to 20% and the terms can be anything from 3 to 18 months. In most cases the amount taken is calculated based on the average credit card sales.
Applying for a Merchant money cash advance has its benefits and things to look out for. Certain businesses that need money quickly and have a good credit card transaction history would benefit from getting a Merchant cash advance. It would also be a good option for a new business that does not have a solid credit history or a restaurant or retail store in need of money can make use of the merchant money cash advance.

This kind of cash advance is ideal because it is a fast way to get money.

The cash advance can be processed in a matter of hours and the money can be given in a few days. This is great when you need money for an unexpected business payment or to cover payroll.
Having good credit is not a strict requirement for this kind of cash advance. The credit standing of the company doesn’t matter much when applying for the cash advance. The important thing is to have an established credit card sales. This cash advance also does not affect the credit score of a company so it cannot be used to build up the credit history of the business.
Aside from those benefits, this type of cash advance does not require a collateral unlike most business loans where collateral is needed so that the bank or lender can get something back in the event the borrower cannot pay the loan.
Another benefit is the flexible payment scheme. In most business loans the interest rate and payment are fixed. The business pays the same amount every month. This can be a problem if the business does not bring in many customers during a particular month. The sales will take a dive, but the monthly payment remains the same. In contrast to the merchant cash advance where the payment is dependent on the sales for that month.
But perhaps the best benefit that a merchant cash advance can give a business is the higher money that can be borrowed. In most cases, the amount can be substantially more than what a bank would normally offer, especially since the business has no established credit history or may even have a not so good history or the absence of collateral.

However, this type of cash advance has its own particular drawbacks.

The first of which is that it cannot help with the credit score of the business. So even if a business makes this kind of cash advance, there is no change in the business’s score, which may be a hindrance, especially for those new companies that are trying to build up a credit score.
The other glaring drawback is the cost to pay this kind of cash advance is far larger than that of a regular loan. It is also not considered a loan so it is not subject to the laws governing the setting of interest rates on a particular lending transaction. While at first glance, the figures may seem favorable to the borrower, on closer scrutiny, one can see that in most cases the amounts being paid can go up to such high levels that it would be very unwise to take this type of cash advance.
However, if the company really needs to take out a merchant cash advance, there are some ways to lessen the payment burden. It would be a good idea to ask for a lower holdback percentage and paying a smaller daily amount will also lower the APR or annual percentage rate. If this can be done, then the company can make the most out of the money they took out without having to pay huge interest fees.


  • Merchant money (also called merchant cash advance) is a revenue-based type of loan, where repayment is taken daily (or weekly) from business sales;
  • Main advantages: unlike other kinds of loans, does not require collateral, it has a minimal documentation and funds are normally ¬†deposited in a few days;
  • Main disadvantages: interest rate is a times higher than other loans, and that’s not the best type of loan for building up credit score.

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