A Merchant Cash Advance is a lump sum payment to a business in exchange for an agreed upon percentage of future credit card and/or debit card sales. Merchant Cash Advance companies provide funds to businesses in exchange for a percentage of the businesses daily credit card income, directly from the processor that clears and settles the credit card payment. A company's remittances are drawn from customers' debit- and credit-card purchases on a daily basis until the obligation has been met. Most providers form partnerships with card-payment processors and take payments directly from a business owner's card-swipe terminal.
Merchant cash advance companies are most often used by retail businesses that do not qualify for regular bank loans. A business cash advance can be expensive compared with interest on a bank loan, ranging from 10% to 100% effective interest. Merchant cash advances are not loans - they are a sale of a portion of future credit and/or debit card sales. Therefore merchant cash advance companies claim that they are not bound by usury laws that would limit interest rates.