Still Curious About a Merchant Cash Advance? The Last Article You Will Ever Need to Read
August 23, 2011
You’ve seen the advertisements, received calls with offers for it, researched it online, but you’re still not sure about Merchant Cash Advance(MCA). Every business needs capital but bank loans just aren’t available. Alternative funding sources are out there and they spend millions of dollars every year trying to reach you. The word “alternative” usually causes business owners to put their guard up. Basically, all non-bank loans warrant skepticisim until proven innocent. We here at the Merchant Cash Advance Resource understand your concerns and would like to answer your questions once and for all. We are not a funding source, reseller, or advertiser and thus maintain an independent perspective on the the MCA industry.
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- How Legitimate is it?
- Who is Really Using it?
- How Big is the Industry?
- How Widespread is it?
- What is the Application and Underwriting Process?
- Who are the Most Well Known Providers of it?
- Who is Regulating it?
- What Happens if you Default on it?
- How does it Compare to an SBA Loans?
How Legitimate is a Merchant Cash Advance?
The purchase of future credit card sales(Merchant Cash Advance or MCA) has been mainstream since 1998. At that time, Kennesaw, Georgia based funding source AdvanceMe, held the patent rights to a process known as split funding. The patent was later invalidated and AdvanceMe was immediately joined by industry veterans AmeriMerchant, First Funds (now Principis Capital), Merchant Cash and Capital, Business Financial Services, and Strategic Funding. All of these firms have been operating since before 2006. As of 2011, there are now nearly 40 documented direct providers of capital.
MCA funding providers are backed by big name hedge funds, a few at one point by well known investment bank, Goldman Sachs. MCAs have frequently popped up in the news and are openly endorsed by some of the largest payment networks in the world. See for yourself:
Feb. 11, 2011 – 10 Reasons to Start a Business This Year
Sept 1, 2009 – Enterpreneurs Turn to Alternative Finance
Apr. 2009 – Merchant Cash Advance Financing: The Good, The Bad, and The Ugly
Brochure and advertisement directly From First Data, the largest merchant acquirer in the world.
Advertisment and endorsement directly from Chase Paymentech
Program is offered by NAB, one of the nation’s largest credit card processors and the 2008 Detroit Regional winner of Ernst & Young Entrepreneur of the Year Award. 
Who is Really Using a Merchant Cash Advance?
Nearly every major national retail or restaurant franchise has used a Merchant Cash Advance. A small sample of the names include the following:
- Burger King
- Domino’s Pizza
- Hooters
- Subway
- Dunkin Donuts
- Taco Bell
- Denny’s
- Wendy’s
- Meineke Car Care
- Maaco
- Aamco Transmissions
- Curves Fitness
Data was obtained directly from Secretary of State UCC-1 filing records. More information on franchise funding can be read in one of our previous articles, “Who is Really Getting a $250,000 Merchant Cash Advance?“
How Big is the Industry?
Experts have predicted that more than $1 Billion in MCAs are being provided to businesses every year. We conducted independent research and was able to validate the size to be greater than at least $500 Million in 2010. Check out the study at, “Complete Merchant Cash Advance Statistics 2010“
How Widespread is Merchant Cash Advance?
The MCA product is not limited to the United States. This product is actively growing in:
- Canada
- United Kingdom
- Australia
- Hong Kong
- Singapore
For a list of international funding providers, take a peek at our article at, “Merchant Cash Advance – Canada, UK, and Beyond!“
What is the Application and Underwriting Process Like?
EASY! We recently released a guide for merchants that breaks the process down step by step. Download the guide here.
Who Are the Most Well Known Direct Providers of Merchant Cash Advance?
The biggest names are compiled in our Funding Directory. Many are BBB accredited and a few are Ernst & Young Entrepreneur of the Year award winners.
Who is Regulating the Merchant Cash Advance Industry?
Since MCAs are a purchase/sale of future credit/debit card receivables, lending laws do not apply. However, most firms belong to a self-regulating body known as the North American Merchant Advance Association. As stated on their website, NAMAA’s purpose is to promote competition and efficiency throughout the industry by:
- Providing education and professional development to its members
- Developing ethical standards and best practices guidelines for the industry
- Evaluating and providing education regarding the development and enforcement of intellectual property rights that affect the industry
- Evaluating and developing improvements to existing business methods and practices
- Developing industry relevant products and services
- Engaging in regulatory and legislative advocacy
What Happens if You Default on a Merchant Cash Advance?
In the case of a legitimate business failure, the merchant’s assets tend to be protected. There is significantly less at stake than a bank loan. We covered this topic once before in an article here, “What Happens When you Default on a Merchant Cash Advance?“
How Do Merchant Cash Advances Compare to SBA Loans?
The Small Business Administration protects banks from defaults for up to 90% of the losses. Despite this wildly generous guarantee, SBA Loans are considered to rank lower than a MCA. How is this is possible and what specific proof is there? Check out our analysis in, “SBA Loan vs. Merchant Cash Advance.“
Conclusion
The Merchant Cash Advance financial product has been in existence for more than a decade and is legitimate, mainstream, endorsed by reputable names, has been used by the most popular franchises in the U.S., is easy to obtain, offers asset protection that loans cannot, is self regulated, and is in many ways BETTER than a loan guaranteed by the SBA. A MCA may not be right for every business, but if it was just uncertainty that was holding you back, fear no more. This thing is for real…
-The Merchant Cash Advance Resource
http://www.merchantcashadvanceresource.com
webmaster@merchantprocessingresource.com
Online Search is King for How Merchants Shop For Funding, Survey Reveals
June 4, 2025Perhaps the most surprising statistic to come out of a 2025 small business lending survey conducted by IOU Financial is that 12% of merchants said they started their search for business funding options from a cold call. But as one might expect, phone calls are not necessarily the direction in which business is moving. Forty-one percent of respondents, for example, complained that they received too many phone calls from multiple reps.
The number one origin point—far above cold calls (12%), friends/referrals (8%), and social media (7%)—was online search (63%). And they’re not just looking at the first website and firing off a form. Fifty-eight percent, for example, said that online reviews were among the most valuable factors in choosing the right business funding provider, while loan calculators and comparison websites/tools also weighed heavily at 49% and 40%, respectively.
Historically, online search primarily meant Google, but according to a TD Bank survey, 30% of small business owners are already turning to AI assistants like ChatGPT for insights on financial health or financing.
And most merchants skip their bank. “More than 70% of small business owners do not apply for business funding with their bank before exploring non-bank options,” the IOU survey found. “This trend highlights a major shift in trust and preference away from traditional banks and toward alternative lenders—which could be driven largely by the desire for speed, flexibility, and ease of access.”
Carl Brabander, EVP of Strategy for IOU Financial, discussed some of the recent findings of this survey at Broker Fair 2025 this past May in New York City.
Merchant Confidential
May 2, 2025Carl Brabander, EVP of Strategy for IOU Financial, will be speaking at Broker Fair on May 19 in New York City. Brabander will be sharing data and tips on how to build trust and win deals in the small business finance industry.
This is a can’t-miss session for brokers. Registration for the full-day conference ends soon. You can sign up here.
Seventy Five Percent of Small Businesses Expect to Do Better in the Coming Year
January 17, 2025
2025 is looking up. That’s one takeaway from the recent State of Small Business Report produced by IOU Financial. More than 75% of small business owners that responded to a survey said that they expected to do better in the coming year, with 42% expecting to do much better. Meanwhile, more than three-fourths of those surveyed plan to invest in their business within the next six months.
Still, cost of goods and interest rates ranked among the highest concerns. Eighty two percent said that they are very or somewhat concerned about cost of goods and seventy seven percent said the same about interest rates.
To read the full report, click here.
Merchants Still Concerned About Inflation, Recession, (and Bird Flu?)
June 12, 2024
Seventy-eight percent of businesses expressed that they are somewhat concerned or very concerned about the cost of goods/inflation right now. The exact same percentage said the same about a possible recession. That’s according to the latest State of Small Business Report compiled by IOU Financial. Interest rates were top of mind too, though not as much as in previous survey periods. For example, while 68% said that they were somewhat concerned or very concerned about interest rates right now, that figure was the lowest recorded since Spring 2022 (at 84%), the first time that survey question was asked. Respondents were right to be concerned at the time since that’s the precise period that rates began to rapidly rise from 0% to the >5% level that they’re currently at.
Of the respondents who answered the write-in portion, a little less than half cited access to proper funding as among the biggest challenge to running their business right now and as the reason they are being held back from growing their business. Concerns about being able to hire qualified staff was also cited on several occasions, an issue that has persisted since the bi-annual survey first started asking about it.
Notably, IOU has persistently asked respondents to weigh in on their concerns about public health as a business challenge despite the world largely having moved on from covid already. While it would come as no surprise then that the percentage of respondents that were somewhat concerned or very concerned about public health in Spring 2022 (63%) had dropped in half by Fall 2022 (30%), the percentage has slowly crept upwards ever since. Fifty-one percent of respondents said that they are currently somewhat concerned or very concerned about public health. Since no further questions were asked to elaborate on that selection, one wonders if they were referring to the recent headlines about Bird Flu.
Summer Dealmaking
July 18, 2023The summer of 2023 has not disappointed. The industry is making moves! In case you missed what moves we’re talking about, here’s a list of the most notable:
7/17/23 – Nav Acquires Tillful
7/14/23 – IOU Financial announces it is being acquired
7/12/23 – Loanspark expands to Canada
7/10/23 – Owners Bank launches SMB loans
6/29/23 – Blue Bridge Financial extends and upsizes corporate note to $20M
6/15/23 – CFG Merchant Solutions surpassed $1B in MCA originations
6/13/23 – Merchant Growth acquires small business loan rights from Loop
Small Businesses Felt the Shift in Q1 as Well
May 10, 2023At the end of last year, small businesses were feeling a renewed sense of optimism about what 2023 might bring. Then the mood soured a little, according to a new study conducted by IOU Financial. “Most businesses did not perform as well during the first quarter of 2023 as they had the previous quarter,” it found. Only 28% of respondents said that their business performed in line with their expectations for the quarter and thirty-seven percent said that their business actually performed worse or much worse. Despite this, only 12% predict that their business will perform worse or much worse in Q2 vs. Q1. In fact, 67% predict that their business will perform somewhat better or much better than Q1.
Interest rates and a possible recession remain the top concerns for business owners. Overall, IOU summed up its findings as a “rocky start to 2023, but optimism for small business growth remains strong.”
Small Business Fears Are Actually Calming Down
January 31, 2023
Right now small business owners are less concerned about rising inflation, a possible recession, staffing issues, consumer demand, and public health than they were in July 2022. Those are among the findings of a recent small business survey conducted by IOU Financial. It appears the fear, uncertainty, and doubt of what the end of 2022 might bring has since subsided and even transformed into a sense of optimism!
Eighty-eight percent of respondents, for example, now project that their business will be somewhat better or much better by the end of the first half of 2023 than they are right now. Sixty-one percent say they even plan to invest in their business over the next 6 months.
The improvement in sentiment seemingly stands in stark contrast to news coming out of the large tech companies that were plagued by layoff announcements all last quarter. The small business sector is looking a little more resilient by comparison, although it still has fears of its own. Seventy-three percent of respondents are still concerned about rising inflation but that’s down from 84% in July and 44% are concerned about consumer demand but that’s down from 62% respectively.
While the circumstances of the economy aren’t exactly great and the impact of rapidly rising interest rates has yet to be determined, this survey at least suggests that small businesses are getting used to this reality.
