The Lure and Danger of Merchant Cash Advances

The financing is fast and easy, but small-business owners can end up paying a heavy price.

What is a merchant cash advance?

Merchant cash advances may seem like a financial lifeline for small-business owners, but this help comes with a high cost.

This page is your guide to merchant cash advances, described by some critics as "payday loans for small businesses." Start here to learn about the long-term costs and financing alternatives. We've also included stories from small-business owners about their experiences.

Although merchant cash advances are quick and easy to get approved, interest rates are high and repayment schedules are often unsustainable. In most cases, entrepreneurs have to pay annual percentage rates of 40% to 350%. Small-business owners can quickly find themselves mired in a debt trap.

That's why NerdWallet suggests that entrepreneurs use extreme caution when considering a merchant cash advance. We've opted not to offer merchant cash advances in NerdWallet's marketplace of financing options for small-business borrowers.

Entrepreneurs should know that there are alternatives — financing options that cost less.

Small-business owners, tell us your story

NerdWallet wants to hear about your experiences with merchant cash advances. Did the financing help your business or hurt it? We would like your feedback. Email us at smb@nerdwallet.com.

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