Merchant Cash Advance

A merchant cash advance is priced with a factor rate rather than an interest rate. A business approved for one hundred thousand dollars at a factor rate of 1.4 repays one hundred forty thousand, regardless of how soon it repays. Repayment comes out automatically, often daily, as a set dollar amount or a percentage of receipts, until the full fixed amount is collected.

The structure is simple and the funding arrives within days, which is part of the appeal. The cost is the trade-off. Because the repayment is fixed and the collection window is short, the effective annual cost of a merchant cash advance is frequently far higher than that of other arrangements, and the daily debit pulls cash out of the account every business day.

The defining features are the fixed repayment obligation and the daily debit. The business owes a set amount back and feels it leave the account continuously, which is what separates this product from selling an asset outright.

For a practice, the daily debit is the part that hurts. A fixed repayment collected every business day pulls cash out exactly when you are trying to make payroll, and the factor-rate pricing can make the true cost far higher than it looks. Understanding the repayment obligation before you accept one prevents a short-term advance from squeezing your operating account for months.

Copay is not a merchant cash advance. There is no lump sum to repay, no factor rate, and no daily debit pulling cash from your account. Copay purchases your eligible insurance claims on a non-recourse basis and pays you the next business day, and when the payer pays, Copay reconciles automatically. You owe nothing back, and a denied eligible claim is Copay's loss.

See how Copay is different.