Same day business cash advance is the quickest solution for businesses facing urgent financial needs, providing immediate funds for operational expenses.
Running a small business often means dealing with cash flow ups and downs. An unexpected expense or temporary shortfall in revenue can leave you scrambling to cover costs.
While getting a loan from a traditional lender may take weeks or months, newer alternative lending options like merchant cash advances can put money in your account the same day you apply.
You’ll learn the pros and cons to weigh when considering a fast business funding option as well as tips to use it strategically.
| Key Takeaways |
|---|
| Know precisely why you need quick financing and reserve for true emergency needs only |
| Compare multiple lender options to negotiate the best possible rates and repayment terms |
| Accurately model the impact on your sales volumes and cash flow before accepting funds |
| Always have an expert review the final agreement to ensure you fully understand all legal terms and conditions |
What is a Same Day Business Cash Advance?
A small business cash advance, also referred to as a merchant cash advance (MCA), provides an upfront lump sum of capital in exchange for a percentage of future credit card and/or debit card sales. The amount advanced is typically based on your average monthly card processing volume.
Unlike a term loan, an MCA has:
- No set repayment schedule
- Daily or weekly payments taken automatically as a percentage of sales
- Approval often within 24 hours
- Funding in as little as 24-48 hours
This flexibility and speed makes MCAs helpful when you need access to working capital fast. However, the costs are also higher than conventional financing.
Key Features
- Amounts from $5,000 up to $500,000+
- Approvals in 1 day
- Funding in as little as 1-2 days
- Fixed percentage deductions from daily/weekly card sales
- No collateral required
A same day business cash advance gives you quick access to capital based on the strength of your business’s revenues rather than your personal credit score or available collateral. Payments adjust up or down based on your sales volume.
How Do MCAs Compare to Payday Loans?
Payday loans allow both consumers and business owners to borrow a small amount of money, usually less than $1,000. The loans typically carry very high-interest rates and fees and come due on your next pay date, often in 2-4 weeks.
Here’s an example to show the difference:
- Payday Loan Amount: $500
- Interest Rate: $15 per $100 borrowed
- Term: 14 days
- Total Repayment: $575
Compared to:
- MCA Amount: $10,000
- Factor Rate: 1.3
- Holdback Percentage: 10%
- Term: 4-9 months
- Total Repayment: $13,000
While they both offer fast funding, payday loans:
- Provide lower dollar amounts
- Carry higher equivalent APRs
- Have fixed repayment dates
- Are regulated differently by states
Top 5 Situations Where a Same Day Business Cash Advance Can Help
Below are some of the most common scenarios where getting quick funding from an MCA may make sense for your startup or small business:
1. Covering payroll during slow seasons
Making payroll should be a top priority, even when revenues dip temporarily. Having funds on hand ensures your team still gets paid on time.
2. Purchasing inventory to fulfill orders
Running out of inventory stalls growth. Access to capital to replenish stock allows you to meet customer demand.
3. Expanding Marketing Efforts
With some working capital for paid ads, content development, or brand awareness campaigns, you can fuel new customer acquisition.
4. Hiring to Keep up With Rapid Growth
Bringing on more staff helps manage increased sales volume flowing into your business.
5. Paying Taxes or Other Essential Expenses
Whether it’s taxes, licenses, utilities, or service fees, covering essential expenses ensures seamless business operations.
While an MCA won’t be the best fit for long-term investments like equipment purchases, it can be a quick fix or stop-gap solution for more immediate needs.
How Do I Qualify for Same Day Financing?
Approval for an MCA depends more on the health of your business than your credit score. Many alternative lenders are willing to work with younger companies and lower credit scores.
Here is what they assess to qualify your eligibility:
- Time in Business: Most lenders require at least 9-12 months.
- Credit Score: Minimum of 500+ but often no minimum.
- Annual Revenue: Some look for $75k-$100k+ in annual sales.
- Daily Card Sales: Brokers look for at least $2,500 a month.
- Valid Business License: Should be registered and compliant in your state.
- Active Business Bank Account: Up to 6 months of recent bank statements.
What Are the Typical Rates, Terms, and Fees?
Costs vary between providers but here are general guidelines on MCA rates and terms:
Factor Rates: Usually 1.1-1.5x the amount advanced
- For example, $100k advance repaid at 1.4x means you pay back $140,000
Term Length: Typically 4-12 months
Payment Deduction Percentage: Ranges from 8%-15%
- If your daily card sales are $1,000 and you agree to 10% holdback, $100 will be deducted and go towards repaying the MCA
Origination & Underwriting Fees: Can be 1-3% of the amount financed
Beyond the higher equivalent APRs compared to traditional SBA loans and lines of credit, it’s also key to understand:
- The shorter the term, the higher your daily deduction percentage will be
- There are often prepayment penalties if repaid early
- If card volume declines, the repayment period gets extended
Be sure to consult a trusted business finance advisor to negotiate the best possible rates and terms for your situation before signing any contract.
| Section | What It Specifies | What To Watch For |
|---|---|---|
| Advance Amount | Total capital provided upfront | Ensure enough working capital without overextending |
| Factor Rate | Multiple applied to advance amount to calculate total repayment due | Payback multiple often 1.2-1.4x |
| Holdback Percentage | Percent of daily card sales deducted for payback | Typically ranges from 8%-15% |
| Contract Duration | Number of months the MCA agreement lasts | Shorter duration = higher daily holdback |
| Personal Guarantee | Legally binds business owner to repay balance if company defaults | Review carefully to understand liability |
7 Mistakes to Avoid With Same Day Business Cash Advances
While MCAs offer a viable short-term lending solution for many companies, they also come with risks if not used strategically. Here are some key mistakes to avoid:
1. Failing to Budget for the Payback
Not accurately forecasting the impact on your cash flow means struggling to make daily payments. Always model different scenarios to size the financing responsibly.
2. Using the Capital for Non-Essential Expenses
Don’t waste valuable working capital that comes at a premium. Reserve funds only for true emergency needs.
3. Not Having a Clear Repayment Plan
Establish a timeline for when you will pay the MCA off to avoid an endless cycle of renewing the loan.
4. Taking Out More Than One MCA at a Time
Too many payment deductions sinking your cash flow makes your situation worse. Avoid stacking obligations.
5. Relying on MCAs as Your Only Financing Option
Explore business credit cards, lines of credit, and term loans in addition to merchant cash advances where possible for more diversity of funding.
6. Not Reviewing the Fine Print Carefully
Scrutinize all MCA terms to catch hidden fees and ensure you fully understand personal liability in a worst-case default scenario.
7. Working With a Disreputable Lender
Only partner with trusted, verified MCA companies and brokers that offer transparent terms and fair rates.
How Does the Application and Funding Process Work?
One of the main appeals of a merchant cash advance is the quick and straightforward application process. Here are the typical steps:
1) Determine Eligibility
Before applying, broker websites often feature a simple eligibility quiz to give you an initial yes or no on qualification.
2) Fill Out the Application
Next, complete a basic one-page application either on the lender’s website or through a loan brokerage platform.
3) Provide Supporting Documentation
After the initial application, you will need to submit documents like:
- Recent bank statements
- Credit card/processor statements
- Existing debts/liabilities
- Proof of business registration
- Tax returns
- Profit and loss statement
4) Get Approved
Underwriters usually provide an approval decision within 24 hours once they review the required paperwork and verify certain financial health metrics.
5) Review and Sign the MCA Agreement
If approved, carefully go through the final merchant cash advance contract detailing:
- Total amount financed
- Factor rate
- Holdback percentage
- Payment Frequency
6) Receive Funding
Finally, once signed, the lump sum is wired within 24-48 hours directly to your business checking account via ACH transfer.
While quick, it is smart to explore multiple lender options to find the best rates and payments for your situation before completing these steps.
Tips for First-Time MCA Borrowers
If you are considering a merchant cash advance for the first time, keep these success tips in mind:
- Start small – Don’t take on more than you know your business can handle repaying. Build a track record with an initial lower amount.
- Use a broker – Brokers shop rates save you money. Fees are usually paid by the lender, not you.
- Review deductions frequently – Log into your processor portal often to validate accurate holdbacks that adjust downward as the balance is paid.
- Have an attorney review the agreement – While not required, it is helpful to fully understand legal terms and liability.
- Explore alternatives concurrently – Apply to online lenders and community banks to compare all options.
- Designate funds properly – Be disciplined about allocating capital injection solely to stated business needs, not personal expenses.
| Company | Time in Business | Credit Score | Annual Revenue | Average Monthly Card Sales |
|---|---|---|---|---|
| Fundbox | 12 months | 600 | $100K | $15K |
| BlueVine | 6 months | 525 | $50K | $15K |
| ROK Financial | 1 year | 500 | $100K | $10K |
Industry Spotlight: Best MCA Uses for Restaurants
The restaurant industry relies heavily on cash flow from daily guest visits to fund operations. When customer traffic varies seasonally, an injection of working capital keeps the doors open.
Popular uses of merchant cash advances for food service businesses include:
- Expanding seating capacity – Adding patio, bar, or event space to serve more guests per day
- Updating décor and furnishings – Refreshing the dining room to attract new patrons
- Installing new equipment – Purchasing new ovens, dishwashers, refrigeration units
- Repairing facilities – Fixing critical issues like HVAC failures quickly
- Funding reservations systems – The OpenTable monthly fee can be hard to manage some months
- Paying for grand opening advertising – Market a new location launch or rebranding campaign
- Replacing smallwares – Keep the back of the house stocked with plates, glassware, utensils
- Bridging seasonal impacts – Ensure payroll continues reliably despite holiday or summer slumps
Because payments adjust based on daily sales, as traffic picks up again, more gets put towards paying back the advance until the balance hits zero.
Finding the Right Lender for You
With the rapid growth in alternative online lending, there are now thousands of potential funding partners vying for your business. The key is identifying legitimate providers that align with your needs and values.
Here are top qualities to look for:
Easy Application Process – User-friendly portal, intuitive questionnaires, helpful support staff
Transparent Terms – Clearly stated interest rates, no hidden fees in the fine print
Strong Security Protections – Meets all PCI compliance and data privacy standards
Positive Reputation – 4-star ratings or higher, largely positive customer reviews
Reasonable Rates – Doesn’t overcharge but also sustainable as a business
Relationship Focus – Takes time to understand your business goals and cash flow dynamics
Doing some due diligence by checking companies on the BBB website and asking fellow entrepreneurs for recommendations helps avoid predatory lenders. Ultimately, finding the right loan broker comes down to trusting your gut instincts.
What Laws and Regulations Should I Know?
While less stringent than conventional bank loans, merchant cash advances still come with regulatory considerations. Most notably, the Federal Trade Commission (FTC) has investigated some predatory small business lending practices in recent years.
They identified areas that now see greater enforcement:
- Disclosures – Requiring transparency on rates and terms
- Collections – Restricting harassment tactics
- Product Misrepresentation – Prohibiting false or misleading statements
Many states also now impose usury caps and enhanced reporting obligations. For example, California’s new SB 1231 law demands providers share:
- Equivalent APR
- Average MCA term length
- Percentage of customers reaching full payoff
Working with established industry associations like the Small Business Finance Association ensures you stay on top of the latest compliance developments. Their code of conduct holds members to high ethical standards.
Financing Considerations For Different Business Structures
When pursuing a same day business cash advance, the type of legal entity you operate under can impact eligibility requirements and optimal loan amounts.
LLC Financing
Limited Liability Companies (LLCs) only require a valid operating agreement to apply for merchant cash advances. Recommended loan sizes typically range from $10,000-$75,000 based on average monthly revenues.
S-Corp Financing
S-Corporations need valid shareholder agreements and articles of incorporation. Their ownership structure poses more complexity so max advance amounts are often capped at $250,000-$500,000 for stronger S-Corps.
Partnership & Sole Prop Financing
As sole proprietors or partnerships, owners also personally guarantee MCA repayment. This results in more conservative approval amounts in the $5,000-$150,000 range based on personal credit strength.
Top Reasons for MCA Denial & Improving Your Chances
While MCAs involve simpler underwriting than conventional small business loans, approvals are still not guaranteed. Here are the primary reasons for denial and what you can do to course correct:
1. Insufficient Time in Business
Most lenders require at least 9-12 months of operations. If less than that, apply once you hit that benchmark.
2. Low Revenue or Sales Volumes
Try securing a smaller MCA amount or work on revenue growth strategies before reapplying.
3. High Existing Debt Burden
Pay down some existing obligations first so that new MCA deductions are sustainable.
4. Poor Personal Credit History
While personal scores are weighted less, major issues still factor in. Address items that you can fix.
5. Not Having All Documents Handy
Thoroughly prep required business ownership, financial, and compliance paperwork upfront to streamline approval.
Other Point of Sale Financing Options
In addition to merchant cash advances, more alternatives leveraging card transaction volume exist. These include:
- POS Line of Credit – Revolving credit facility with lower costs secured by future sales
- ACH Advance – Capital injection taking fixed repayments via ACH debits, not tied to volume
- Channel Partners – Embedded financing offered by merchant service providers
Each option has different pros, cons, and eligibility criteria to evaluate based on your needs.
Evolution of Small Business Lending Regulations
Oversight of alternative online lenders continues expanding to boost transparency and prevent abuse. Key regulatory changes include:
- State-Level Interest Rate Caps – Establishing upper limits to prevent predatory pricing
- Enhanced Reporting Requirements – Collecting and disclosing detailed financing metrics
- Standardized Disclosure Forms – Simplified applications outlining full costs upfront
- Creation of the CFPB – Consolidating oversight of financial products into one federal agency
- Reining in Misleading Claims or Actions – Restricting deceptive language, collections tactics
While regulation adds compliance work, ethical lenders welcome reforms to instill trust.
The Fintech Revolution Expanding Access
Financial technology innovations enabled the rise of alternative online lending options like merchant cash advances in the first place. By digitizing and automating processes, fintech now makes applying for capital easier than ever.
Key innovations include:
- Digital Applications – Easy online forms removing paperwork obstacles
- Data Analytics Underwriting – Automated review of financials for faster decisions
- Straight Through Processing – Seamless system workflows improving back office efficiency
- Bank Partnerships – Leveraging FDIC-insured institutions for funding stability
- Mobile Account Access – Checking balances and making payments via apps
Fintech breakthroughs level the playing field so companies of any size can secure essential growth financing.
Which Option Should My Business Choose?
With this overview of the merchant cash advance landscape, you now understand why, how, and when pursuing a same day business cash advance aligns with your growth priorities and action plans.
Gerry's commitment to helping businesses thrive is evident in his track record of providing tailored financial guidance. He understands the unique challenges that companies face and is dedicated to finding innovative solutions to support their growth.
When he's not working with clients or exploring the dynamic world of business financing, Gerry enjoys staying updated with industry trends and sharing his insights through informative articles. His passion for empowering businesses with financial knowledge is a driving force behind his work.
Connect with Gerry Stewart to tap into a wealth of financial expertise and unlock opportunities for your business's success.
