What Can a Merchant Cash Advance Be Used For?
Common MCA uses and which ones fit a daily or weekly payment.
Who should read this: business owners deciding whether an advance fits the need in front of them, and anyone who wants a neutral list of common uses.
We're not a funder.
We don't fund deals ourselves. We shop yours with funders who do, so you see more than one offer.
Only funders that fit.
Your file goes to funders that work with your industry and your deal size. Nobody else sees it.
You make the call.
Every offer comes to you in writing. Nothing happens until you pick one.
- What it costs to apply
- Nothing. Applying costs you nothing, and Afterfirst MCA charges you no fee.
- Credit
- Ask us how each funder checks credit before you agree to anything.
- Speed
- We call you back and talk with you before your file goes to any funder.
- Offers
- Every offer shows the total payback, the payment amount, how often it comes out, and the term.
Why does the use of funds matter to a funder?
The use of funds matters because it tells the funder whether the money will produce the receivables it just bought. Inventory that sells through in six weeks makes the account stronger during the term. Money used to make other funders' payments makes it weaker. Underwriters read the stated use next to the statements, and a use that doesn't match the account draws a second look.
MCA uses that pay back on the remittance clock
Uses that turn into sales within the estimated term line up with the remittance, and uses that pay off over years usually don't. We sort the six common uses by that timing:
| Use | How soon it usually shows up in deposits | Fit with a daily or weekly payment | Page |
|---|---|---|---|
| Cash flow gap | As soon as the late receivable lands | Good when the gap has a known end | Cash flow |
| Inventory | As the stock sells through | Good when sell-through is shorter than the term | Inventory |
| Repairs | When the broken asset is earning again | Good when downtime is costing sales now | Repairs |
| Payroll | Indirectly, by keeping crews working | Depends on the receivable behind it | Payroll |
| Expansion | After a ramp period | Weak; the payment starts before the ramp ends | Expansion |
| Equipment | Over the asset's working life | Often weak; equipment financing may fit better | Equipment |
The timing column is a rule of thumb from reading files, not a funder requirement.
When a use should make an owner stop and reconsider
Using a new advance to make payments on existing advances should make an owner stop. That pattern usually means the account can't carry the current payments, and a new position adds another. The Guide to payments that are too high covers the options that don't add a payment.
How funders check the stated use
Funders check the stated use of funds by comparing it with what the statements already show. A use that matches the business's pattern reads as ordinary; a use that doesn't draws follow-up questions.
Uses that fit the account's rhythm
An inventory buy from a retailer that already pays suppliers every month fits the account's rhythm. So does a repair for a shop whose statement shows the repair bill.
Bridging to one large receivable
Some owners need money only until one large customer pays. That use reads well when the invoice is real and the customer has paid on time before.
Invoice copy and payment history
A copy of the invoice and a note on the customer's usual payment timing help the funder see the end of the gap. Past deposits from the same customer help more.
Five weeks to a reliable customer's payment
A short note might say: invoice to a regular customer, due in five weeks, same customer paid the last four invoices within terms. That tells the funder when the account refills.
A customer with a mixed payment record
If the customer has paid late before, say so and show how late. A funder reads an honest history better than one it discovers.
Every use, and what a funder asks about it
- When cash flow funding from an advance fixes a timing gap
Cash flow funding through a merchant cash advance fits a gap with a known end. How to tell a timing gap from a revenue problem, and how to size it.
- Equipment funding through an advance, compared with leasing
Equipment funding with a merchant cash advance is often the wrong tool. When equipment financing or a lease fits better, and when owners use an MCA anyway.
- Business expansion funding tested without the new site's revenue
Business expansion funding from a merchant cash advance starts pulling before the new site ramps. How we test the plan, and which structures fit better.
- Inventory funding that sells through before the term ends
Inventory funding through a merchant cash advance works when stock sells within the term. Compare supplier terms, credit lines and an advance first.
- Business funding for payroll when a receivable runs late
Business funding for payroll with a merchant cash advance puts wages and a fixed payment in the same week. The math, and what to confirm before signing.
- Emergency business funding when equipment breaks mid-season
Emergency business funding through a merchant cash advance fits a repair that brings revenue back. What a funder wants to see and how to size it.
Use of funds, asked often
Can merchant cash advance funds be used for personal expenses?
Merchant cash advance contracts are commercial and typically require the money to be used for business purposes. Using the funds personally can breach the contract. Read the use-of-proceeds section of your agreement.
Do I have to prove how I spent a merchant cash advance?
Most funders don't ask for receipts after funding, but they do ask what the money is for when you apply. The stated purpose is part of what they underwrite. Keep the use consistent with what you told them.
Is a merchant cash advance a good way to buy equipment?
Sometimes, but equipment usually pays for itself over years while an advance is collected over months. Equipment financing or a lease spreads the cost over the asset's life. An advance can still fit when the need is urgent and the item is inexpensive relative to deposits.
Sources
- The SBA's Fund your business guide walks through funding options from investors to crowdfunding; several MCA uses on this page have a better-matched option there.
Afterfirst is not a funder; all offers are subject to funder underwriting.
Cost, credit, speed and stacking
Cost
Credit
Speed
Stacking
Send one file.
See what fits.
Call 877-FUND-654 with questions.