How we can help
Before you take (or renew) a cash advance, see if your store qualifies for a business loan: fixed payments, a set term, and no daily debits.
Check if my store qualifies →Key takeaways
- An MCA is priced with a factor rate. Annualized, the cost is often far higher than any bank or SBA loan.
- Daily or weekly debits can strain a liquor store's cash flow, especially during slow months.
- Stacking multiple advances is one of the most common reasons good stores end up in financial trouble.
- If you have one, an SBA or term-loan refinance may lower your payments substantially.
Market overview
- What it is
- Purchase of future receivables, not a loan
- Pricing
- Factor rate (e.g., 1.15–1.50)
- Repayment
- Daily or weekly debits / % of card sales
- Speed
- 1–3 business days
- Typical term
- 3–12 months
Typical market ranges, not offers.
How a merchant cash advance works
An MCA provider buys a portion of your future sales at a discount. You receive a lump sum, say $50,000, and agree to deliver a larger fixed amount, say $67,500 (a 1.35 factor rate), through daily or weekly bank debits or a percentage of card sales. Because it's structured as a sale of receivables rather than a loan, it isn't subject to the same rules as loans in many states, though several states now require cost disclosures for commercial financing.
What it really costs
Illustrative example: Comparing costs
A $50,000 advance at a 1.35 factor rate means repaying $67,500, or $17,500 in cost. Repaid over about 6 months with daily debits, the effective annualized cost is well above 100% APR. A $50,000 SBA Express or bank term loan over 5 years at an assumed 11% would cost roughly $15,200 in interest over five years, with far smaller monthly payments.
Hypothetical scenario for illustration. Numbers are rounded and are not a quote or offer.
Before you sign
Ask for the total repayment amount, the estimated APR or annualized cost (required by law in some states), the payment frequency, and whether there's any discount for early payoff. Read the reconciliation clause, which lets payments adjust if your sales drop.
When an MCA might make sense
Where it works well
- A true emergency (a compressor fails before a holiday weekend) and no other option is available fast enough
- A very short-term, high-return opportunity where the profit clearly exceeds the cost
- Credit or time in business that rules out other options, with a clear plan to refinance
Watch out for
- Very high effective cost
- Daily debits drain cash during slow periods
- Stacking multiple advances can spiral quickly
- Confessions of judgment or aggressive collection terms in some contracts
Better alternatives for most liquor stores
- Business line of credit for recurring needs
- Short- or medium-term working capital loans with fixed payments
- Equipment financing for coolers and equipment emergencies
- SBA 7(a) or SBA Express for permanent needs and refinancing
Already have an MCA (or several)?
You're not alone. Many liquor store owners took advances when nothing else was available. If your store now has steady revenue and decent credit, you may be able to refinance into a term loan or SBA loan with much lower payments. SBA refinancing of MCAs is possible in some cases if the refinance meets SBA rules and improves your cash flow.
Paying daily on one or more advances? See if you can refinance.
Review my refinance optionsFrequently asked questions
Is a merchant cash advance a loan?
Can I refinance a merchant cash advance with an SBA loan?
What is a typical factor rate for a liquor store MCA?
Sources
We cite primary sources: federal agencies, regulations, and official program rules. Rules vary by state and change over time.
General education, not legal, tax, or financial advice. Loan programs, state alcohol laws, and lender requirements change and vary by state. Disclosures.