What It Is
A merchant cash advance is structured as a purchase of future receivables. A business sells a specified amount of its future card or bank receipts for an upfront payment. It then remits an agreed share of its receipts, usually daily or weekly, until that amount is delivered.
Small and midsize businesses use merchant cash advances for working capital, often when bank credit is slow or unavailable. Because remittances are tied to the business’s receipts, the contract has no fixed term.
Why It Is Complex
Each advance depends on one merchant’s sales and on how its contract is written.
- Remittances follow the merchant’s sales, which can slow, stop, or move to other accounts.
- A business may hold advances from several providers at once, which complicates collection.
- How an advance is characterized in law depends on its terms and on the law that governs the contract.
- Disclosure and registration rules for this kind of financing differ from state to state.
- The quality of each advance depends on the originator’s underwriting, servicing, and collections.
Northway’s Role
Northway’s focus in this area is capital for companies that originate and service merchant cash advances.
Inquiries
Companies in the merchant cash advance sector can reach Northway through the inquiry form.