Quick answer
A merchant cash advance is a lump sum given to a business in exchange for a share of its future card sales. Instead of fixed instalments, the provider collects an agreed percentage of each day's card takings until a set total, usually the advance multiplied by a factor, has been repaid. Repayments shrink in slow weeks and grow in busy ones, but the total cost stays the same.
Key points
- Repaid from an agreed share of daily card takings, not fixed instalments
- Total repayable is fixed upfront, usually the advance multiplied by a factor
- Suits card-heavy businesses such as cafés, retail and hospitality
- Slow trading stretches the term but doesn't reduce the total cost
Picture a provider standing beside your EFTPOS terminal, taking a few cents from every tap until an agreed figure has been collected. That’s a merchant cash advance in one image. You get a lump sum today; the provider gets a fixed share of your future card sales until it has received an amount set on day one.
How the split and the factor fit together
Two numbers run the whole arrangement.
- The factor sets the total. A $40k advance at a factor of 1.3 means $52k must be collected, whether that takes five months or ten. Our factor rate entry explains the maths.
- The split (sometimes called the holdback) sets the speed. It’s the percentage of each day’s card settlements the provider keeps, with the balance settling to you as usual.
Some providers collect through your terminal or merchant facility. Others take a fixed daily or weekly direct debit sized from your average takings, which behaves more like a short-term loan. The flexible version is what most people mean by the term, and it’s the version worth understanding before you sign.
Why businesses use them
Card-heavy businesses such as cafés, bars, salons and retail shops often have strong daily takings but little property to offer as security. Providers lean on months of settlement data, so approval can be quick and an imperfect credit file isn’t always a deal-breaker. The Reserve Bank’s 2018 review of small business finance noted that online lenders were filling a gap for smaller businesses that found bank credit hard to get, while also recording owners’ concerns about cost.
The flexibility is real. In a quiet week less leaves the account. The catch is that the cost doesn’t flex with it: a slow season makes the advance last longer without making it cheaper per dollar.
Worked example: a Fremantle café through winter
A café takes an advance of $40k at a factor of 1.3, so $52k is repayable. The split is 12% of card takings.
| Summer | Winter | |
|---|---|---|
| Average daily card takings | $3,000 | $2,000 |
| Daily amount to provider | $360 | $240 |
| Trading days to clear $52k at that pace | about 145 | about 217 |
The total cost is $12k either way. What changes is how long a slice of every sale is spoken for. If the owner was counting on the advance clearing before winter, the extra months can squeeze stock orders and wages.
If those numbers look familiar, see whether a term loan or secured option would cost less. A one-minute enquiry is enough for us to start comparing.
What the surcharge ban changes
From 1 October 2026, following the Reserve Bank’s review of card payments, businesses can no longer add a surcharge to card payments. The RBA has also lowered interchange caps, so merchant fees should come down over time. For a business that used to pass card fees on to customers, though, every card sale now carries a cost the business absorbs itself, before the split comes off. Run your figures on current margins, not last year’s, before taking on a takings-based advance.
Related terms
Compare the product with alternatives in merchant cash advance vs business loan and revenue-based finance vs merchant cash advance. The full product explainer is on our merchant cash advance loan page, and cash advance covers the broader term.
Thinking about an advance, or stuck in one?
Sometimes a merchant cash advance is the right tool. Often a business that qualifies for one could also qualify for something cheaper, especially with property behind it. Let us see the whole picture before you commit. Our form takes roughly sixty seconds, there’s no credit enquiry for asking, and your file goes to one team instead of a crowd of funders. Someone on our team works through it personally, then picks up the phone. Enter your real card takings and any advance you already have, so the comparison we give you is a true one.
Frequently asked questions
Is a merchant cash advance a loan?
Some are structured as a purchase of future card receivables rather than a loan, and others are short-term loans repaid from card takings. For the business owner the practical effect is similar: you receive money now and repay a fixed larger amount later. Read the contract to see which structure you're signing.
What percentage of card sales do providers take?
It varies with the size of the advance, your takings and the provider. The agreed share, often called the split or holdback, is set so the advance is expected to clear within a target period. Ask what happens to that period if takings fall by a quarter.
Can I get a merchant cash advance with bad credit?
Often more easily than a bank loan, because providers lean heavily on your card-sales history. Consistent takings over recent months usually matter more than an old default, though every provider has its own limits.
Can I switch EFTPOS providers while an advance is running?
Usually not without the provider's consent. Many agreements depend on collecting the split through your terminal or merchant account, and changing it without agreement can be treated as a breach.
How do I get out of an expensive merchant cash advance?
Ask the provider for a written payout figure, then compare it with refinancing options such as a term loan or a property-secured loan. Our page on paying out a merchant cash advance walks through the choices.