Key Takeaways
- Merchant cash advances (MCAs) accept DACA applicants but carry very high effective costs — understand the terms
- An MCA is not a loan — it is a purchase of future receivables at a significant discount
- Daily automatic repayment can create severe cash flow strain for DACA businesses
- Bankable's revenue-based monthly repayment is typically more flexible and lower cost than most MCAs
- If you have been offered an MCA, compare it to a Bankable tranche before signing anything
Merchant cash advances are widely available and widely misunderstood. For DACA business owners who have been rejected by banks and the SBA, MCAs may seem like the only option. They are not — and understanding why matters for your business's financial health.
What Is a Merchant Cash Advance?
An MCA is technically not a loan. It is a purchase of your future revenue at a discount. An MCA provider gives you $50,000 today and collects $70,000 from your daily credit card sales over the next 6 months. The $20,000 difference ($70K minus $50K) represents the provider's return — equivalent to a 40% factor rate.
MCA Costs Are Often Hidden
MCAs are quoted as "factor rates" (1.2x, 1.3x, 1.4x) rather than APR, making cost comparison difficult. A 1.3 factor rate on $50,000 repaid over 6 months equals approximately 80-120% APR. This is significantly higher than any other business financing product.
MCA Daily Payment Risk
Most MCAs collect payment daily through automatic ACH deductions or credit card holdbacks. On a slow day, the MCA still takes its fixed percentage. During a slow week, cash flow can become critically thin — leaving you without funds for payroll or supplies.
When MCAs Are Acceptable
MCAs can be appropriate in narrow circumstances:
- You need capital in 24 hours for a genuine emergency with no other option
- You have very strong daily credit card sales that make daily repayment manageable
- The short repayment term (3-6 months) aligns with a specific revenue event (a contract payment, a seasonal peak)
Bankable vs. MCA: The Key Differences
| Factor | MCA | Bankable |
|---|---|---|
| Repayment frequency | Daily automatic deduction | Monthly, revenue-based |
| Effective cost | 80-150% APR equivalent | Lower — transparent pricing |
| Decision speed | Same day - 24 hours | 48 hours |
| DACA accepted | Usually yes | Yes |
| Cash flow impact | High daily drain | Monthly, manageable |
Frequently Asked Questions
Yes. Most MCA providers accept DACA applicants — they focus on daily credit card sales volume, not immigration status. But accessibility does not mean suitability. Understand the full cost before proceeding.
Factor rates of 1.2-1.5 translate to effective APRs of 60-150% depending on repayment speed. This is significantly higher than any other business financing product. Always calculate the APR equivalent before signing an MCA.
For most established DACA businesses, yes. Bankable's revenue-based monthly repayment is more flexible, less cash-flow-disruptive, and typically lower in effective cost than most MCAs.
A $50,000 MCA with a 1.3 factor rate means you repay $65,000. If your daily holdback rate is 12% and your daily credit card sales average $1,500, you pay $180/day. Over 361 days, you've repaid $65,000.
MCAs are not regulated as loans in most states because they are structured as receivables purchases, not debt. This means there are fewer consumer protections. Read the MCA agreement carefully before signing.
Yes. An MCA agreement is a legal contract. If the business defaults, the MCA provider can sue the business and, if a personal guarantee was signed, the individual business owner. Do not sign agreements you cannot fulfill.
Factor rate (not just dollar amount), repayment period, daily holdback percentage, prepayment terms (some MCAs do not allow prepayment), and personal guarantee clause. Have an attorney review large MCA agreements.
Bankable can provide working capital that is used to pay off an existing MCA — effectively refinancing at better terms. This is a common use case for businesses that took an MCA and are now established enough to qualify for Bankable funding.
No mainstream MCA providers specialize in DACA businesses specifically. Most accept DACA applicants simply because they focus on revenue, not immigration status. Compare any MCA offer against Bankable before signing.
Bankable tranches are structured debt capital with monthly revenue-based repayment and transparent terms. MCAs are purchases of future receivables with daily automatic collection and significantly higher effective costs. Bankable is not an MCA product.