A pipe bursts, flooding your storefront. Your computer dies, leaving you no way to complete promised work. Your delivery truck crashes, stranding you with repair bills and no way to deliver goods.
These legitimate and all-too-common emergencies can threaten to overwhelm small businesses. Even a slow month can make it hard to meet payroll or pay outstanding invoices.
Merchant cash advances (MCAs) promise a quick infusion of cash without the delays and red tape of traditional lending. Providers heavily promote them to small business owners, declaring they can get you money in a few days. But cash advances are usually too good to be true.
“MCAs are the fast food of financing—quick, easy to get, and available when you’re desperate,” says Kyle Lovell, Chief Lending Officer at Business Impact NW. “When you’re staring down a deadline, an MCA can feel like the only door open to you.”
Cash flow crises are real, bills need to be paid, and sometimes you need a stopgap solution. But before you turn to the largely unregulated MCA sector for help, know what’s behind the veneer of quick cash advances—and get expert recommendations to avoid debt traps.
“MCAs are the fast food of financing—quick, easy to get, and available when you’re desperate. When you’re staring down a deadline, an MCA can feel like the only door open to you.” - Kyle Lovell
If you’ve ever faced a business expense you didn’t know how to cover, you’re not alone. In the US, 80% of women- and minority-owned businesses don’t have access to external funding at the time of startup, leaving these entrepreneurs to absorb unexpected costs on their own, according to research from the Ewing Marion Kauffman Foundation. Even well after your business is established, fronting the cost for a new product launch or paying employees when a client’s check is “in the mail” can send you looking for help.
MCAs pose as heroes to swoop in and save your small business. But the structure of these cash advances means they’re not technically loans, so they’re not subject to the same regulations and protections as traditional financing. They hide huge flaws in the fine print.
Every funding method has perks and downsides. The important thing is to make an informed decision. “Cash advances don’t require a perfect credit score or collateral. But the high fees and intense repayment schedule pushes them to last on the list,” McKeon says. “Debt is part of running a business for the long-term—just be sure to gather all the details about any agreement you sign. We don’t want one debt to bring you into more debt.”
Whether you’re in need of a cash cushion now or could find yourself in a tight spot in the future, read this expert advice before taking out a cash advance.
“Debt is part of running a business for the long-term—just be sure to gather all the details about any agreement you sign. We don’t want one debt to bring you into more debt.” - Ren McKeon
If you wait until you need money to prepare your business to get financing, a cash advance may be your only choice. To give yourself options, keep your business in shape for a future loan application. Monitor your business credit health and take the steps to improve it, such as paying bills on time and leaving wiggle room on credit cards.
Then take a fresh look at your bookkeeping and accounting practices. Make sure you’re accurately tracking your assets, revenue, debt, and expenses. Current numbers will enable you to prove cash flow, produce a financial report, and create future income projections, all of which a traditional lender would need.
Just like you’re served ads for getaways after you google vacation ideas, your online footprint as a small business owner may help MCA servicers target you. Those personalized pop-ups don’t mean MCAs are the only (or best) fit for you. “There are more affordable and transparent financing options available,” Lovell says.
Meet with a loan officer at a credit union or bank, an Xcelerate coach, or an expert at a nonprofit Community Development Financial Institution (CDFI) like Business Impact NW. They can explain the different types of loans, such as a Small Business Administration (SBA) loan, as well as how to qualify and apply for one. “These alternatives provide clearer terms and are designed to support sustainable growth,” Lovell continues. “Yes, they take more paperwork and patience up front. But you’re trading a few weeks of process for years of breathing room.”
It’s best to get to know a loan expert well before you need financial support. “Talk to a lender or advisor before the emergency hits,” Lovell recommends. “Build the relationship early so financing isn’t a scramble.”
Being a known entity, rather than a stranger off the street, makes you more likely to be approved.
As a small business owner, you are deeply attuned to your community. That same crew can pull through for you when your business needs a boost. “Crowdfunding or borrowing money from your close community involves much lower fees than a cash advance,” McKeon says.
Grassroots approaches such as crowdfunding and borrowing from friends and family have powered small businesses, especially those run by women and minorities, since long before structured loans existed. Consider how to position your ask. Your fans may be thrilled to seed the development of a new product, pre-pay for a new service you’re building, or chip in to address an emergency like a broken freezer. Alternatively, you could run a “fix the freezer” campaign promoting gift cards that would inject cash into your business immediately, allowing you to cover today’s expenses without staring down interest rates.
The US MCA market was valued at $19.65 billion in 2024, according to Verified Market Research. So if you’ve already taken out a cash advance, you’re far from alone. “Say it out loud to someone who can help,” Lovell advises. “That sentence is the hardest but most useful one you’ll say all year.”
You may be able to refinance an MCA into a more affordable loan. Restructuring debt could provide your business some relief. It could even prevent the need for another emergency advance to address the problems caused by the first one.
When you're running a small business facing a cash flow issue, the logistical and practical issues can feel overwhelming. The emotional impact of needing a financial life raft can be just as heavy.
“Women founders often carry an extra layer of needing to prove they belong in the room, so admitting I need cash fast and don’t have great options can feel like failure instead of what it is: a normal, common business moment,” Lovell says. “But needing capital isn't a character flaw.”
Talking with a trusted mentor, a peer who has gone through something similar, or an Xcelerate coach can help dispel the shame, fear, and panic that accompany these circumstances. Your network will help you through this rough patch, Lovell says. “The businesses that make it aren’t the ones that never need help; they’re the ones that ask before things get desperate.”
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