A merchant cash advance was originally structured as a lump-sum payment to a business in exchange for an agreed-upon percentage of future credit card and/or debit card sales. The term is now commonly used to describe a variety of small business financing options characterized by short payment terms (generally under 24 months) and small regular payments (typically paid each business day) as opposed to the larger monthly payments and longer payment terms associated with traditional bank loans. The term “merchant cash advance” may be used to describe purchases of future credit card sales receivables, revenue and receivables factoring or short-term business loans.
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