The Complete Guide to Merchant Cash Advances in Australia

A merchant cash advance is not technically a loan. It is a purchase of your future card revenue at a discount. A funder provides your business with a lump sum and in return receives a fixed percentage of your daily card sales until the agreed total has been repaid. Because an MCA is structured as a receivables purchase rather than a credit product, it may not fall under the National Consumer Credit Protection Act (NCCP), which means fewer regulatory protections for borrowers. The Australian alternative lending market surpassed $20 billion in 2025, with MCAs representing one of the fastest-growing segments as more small businesses seek speed and flexibility over traditional bank processes.

Unlike a loan with fixed monthly repayments, an MCA is repaid through a holdback — a set percentage of your daily EFTPOS and credit card transactions, typically between 5% and 20%. On a strong trading day the funder collects more, and on a quiet day the amount drops proportionally. This variable repayment structure means there is no rigid monthly deadline to meet, which appeals to businesses with fluctuating revenue. Most MCAs are fully repaid within 3 to 12 months depending on sales volume and the holdback percentage. The funder deducts the holdback automatically from your merchant terminal or payment gateway each day, so there is no separate transfer to manage.

MCAs use factor rates rather than annual interest rates, which can make cost comparisons difficult. A factor rate between 1.1 and 1.5 is applied to the advance amount to determine the total repayment. For example, a $50,000 advance at a factor rate of 1.3 means you repay $65,000 regardless of how quickly or slowly the balance is cleared. Because the cost is fixed at the outset, repaying faster does not reduce the total amount owed, unlike a traditional loan where early repayment saves interest. When converted to an equivalent annualised percentage rate, MCAs can represent effective costs of 40% to 150% or more, making them one of the most expensive forms of business funding available.

Traditional business loans offer lower interest rates, fixed or variable repayment schedules, and are regulated under the NCCP for consumer purposes. MCAs offer speed, minimal documentation, no fixed collateral requirements, and automatic revenue-linked repayments. Where a bank term loan might take two to four weeks with full financial documentation, an MCA can settle in 24 to 48 hours based on bank statements and card processing history alone. However, the total cost of capital is significantly higher with an MCA. Businesses with the ability to wait and provide documentation will almost always pay less with a line of credit, invoice finance facility, or unsecured business loan. MCAs are best understood as a last-resort or time-critical solution, not a primary funding strategy.

MCAs are designed for businesses with high card transaction volumes and relatively predictable daily sales. Hospitality venues such as cafes, restaurants, and bars are natural fits because the majority of their revenue flows through card terminals. Retail stores, e-commerce businesses, health and beauty providers, and food trucks also benefit from the revenue-linked repayment model. Seasonal businesses that experience surges followed by quieter periods can use MCAs to fund stock purchases or marketing ahead of peak trading, knowing that repayments will scale down when sales ease. Businesses with primarily B2B invoicing or cash-heavy operations are generally not suitable candidates.

Most MCA providers require a minimum monthly card turnover of $10,000, though some set the threshold at $5,000 for smaller advances. You will typically need at least 6 months of trading history with consistent card processing records, an active ABN and GST registration, and recent bank statements showing stable revenue patterns. Credit history is less critical than with traditional lending because the funder is buying future receivables rather than extending credit. Businesses with minor credit impairments or ATO debts can often still qualify provided card turnover is strong. Documentation is minimal — usually 3 to 6 months of bank and merchant statements plus identification.

The primary risk of an MCA is the high effective cost. Because factor rates are fixed, borrowers pay the same total regardless of repayment speed, which penalises businesses that repay quickly. Daily deductions can also strain cash flow if trading drops unexpectedly, even though the percentage remains constant. Stacking — taking multiple MCAs from different providers simultaneously — is a serious red flag that can lead to combined holdback percentages exceeding 40% of daily sales, creating an unsustainable drain on working capital. Predatory providers may obscure total costs, impose early termination penalties, or include personal guarantee clauses that defeat the purpose of unsecured funding. Always request a clear breakdown of the total repayment amount, factor rate, holdback percentage, and estimated repayment period before signing.

An MCA makes sense when you need capital within 48 hours for a time-sensitive opportunity, your business processes significant card revenue but lacks the documentation or credit profile for traditional lending, or you need short-term funding that flexes with seasonal trading patterns. If your cash flow challenge stems from slow-paying B2B customers, invoice finance is almost always a better and cheaper solution. If you need ongoing access to working capital, a revolving line of credit provides more flexibility at a fraction of the cost. If you can wait 5 to 10 business days and provide financial statements, an unsecured business loan at 7 to 16% p.a. will save you thousands compared to an MCA at a 1.3 factor rate.

At Andorra Private, we take an advisory-first approach to merchant cash advances. Before recommending an MCA, we assess whether a lower-cost alternative such as a business line of credit, invoice finance facility, or unsecured loan might achieve the same outcome for less. When an MCA is genuinely the right fit — typically for speed-critical or short-term needs — we connect you with reputable providers offering transparent terms, competitive factor rates, and fair holdback structures. Our role is to ensure you understand the true cost, avoid predatory arrangements, and use MCAs strategically rather than as a default funding source.