How a merchant cash advance works
A merchant cash advance isn't a loan. It's a purchase of a portion of your future card takings at a discount. The funder advances a lump sum and recovers it by taking an agreed percentage of each day's card settlements until the full amount is repaid.
Because repayment is a share of takings rather than a fixed instalment, it flexes with trade. A quiet week costs you less; a busy week clears it faster. For businesses with heavy card volume and genuinely unpredictable weeks, such as cafes, salons and retail, that matching is the real appeal.
Typical terms across our panel
| Advance size | $25,000 to $2 million, generally capped near one month of card turnover |
|---|---|
| Pricing | A factor rate of roughly 1.10 to 1.45, not an annual interest rate |
| Repayment | A fixed percentage of daily card settlements, commonly 5% to 20% |
| Typical duration | Three to twelve months, depending on takings |
| Effective annual cost | Frequently 25% to 60%+ once annualised. We'll calculate yours |
| Early payout | Limited or no rebate on the fee. Check the agreement carefully |
| Security | Usually a director's guarantee; sometimes a GSA |
| Minimum card turnover | Typically from around $10,000 a month |
The part you need to understand before you sign
This is the most misunderstood product in Australian business finance, and we'd rather lose the deal than have you misread it.
A merchant cash advance is priced as a factor rate, not an interest rate. Borrow $100,000 at a factor of 1.24 and you owe $124,000. Full stop. There is no reducing balance, and the $24,000 does not shrink because you repay quickly. If anything, repaying faster makes the effective annualised cost higher, because you're paying the same fixed amount over a shorter period.
Put in annualised terms, a factor of 1.24 repaid over eight months works out somewhere around 60% a year, several times what an unsecured term loan on the same file would cost. Sometimes that's a rational trade for speed. Often it isn't, and nobody has done the arithmetic out loud.
Paying it out early usually saves you very little
Because the amount owing is fixed at the start, early payout typically attracts only a partial rebate of the fee, and some agreements offer none at all. Businesses regularly assume they owe the remaining balance and discover the payout figure is far higher. If you're refinancing an advance, the first thing we do is get the actual payout figure in writing. Not an estimate, and not your reading of the app.
When it makes sense, and when it doesn't
- It can make sense when the funds generate a return inside the repayment window: stock that turns over quickly, equipment that unlocks work already contracted, or a genuine opportunity with a hard deadline.
- It rarely makes sense for covering ongoing shortfalls, funding losses, or paying out another expensive facility. Daily deductions against already-tight cashflow are how businesses end up with three advances running at once.
If you're carrying advances already, don't take another. Talk to us about restructuring what's there first.
What lenders are looking at
- Card turnover volume and consistency across at least six months.
- The split between card and cash or transfer revenue, because the advance can only be recovered from card settlements.
- How long the terminal has been running and whether the provider is supported.
- Existing advances or daily debits already hitting the account.
What you'll need to send
- Twelve months of business bank statementsEvery trading account.
- Six months of merchant terminal statementsYour card settlement history is the core of the assessment.
- Your ABN and GST registrationWe pull most of this from the ABR ourselves.
- Director identificationDriver's licence or passport.
- An ATO integrated client account statementOnly where there's a balance owing.