What to Look for in Merchant Cash Advance Contracts

Merchant cash advance contracts filled with legalese can be overwhelming. In the eyes of the law, it is up to you to understand what you are signing and what terms you agree upon in any business loan contract. Online business loans are no exception.

No two online lenders are exactly the same, and so the merchant cash advance contract between two lenders may be slightly, or very, different. However, there are a few similarities and sections that all small business owners should be diligent enough to read and understand no matter what.

Methods of Collection

How is the online lender going to collect payments? For merchant cash advances, there is no fixed date of repayment. Instead, repayment is gathered through a predetermined percentage of credit card sales until the principle and agreed upon interest is fully paid.

Dispute Resolution

Look for the words binding arbitration in the merchant cash advance contract. This means that in the event of a disagreement or dispute, both parties, the small business owner, and online lender will meet with a third-party mediator who will decide and settle the case. If the arbitration is binding, it means that there is no appeal process and no going to court.

Some may prefer the option of arbitration because it avoids costly court expenses and is usually handled by someone who is a professional in the industry. This is a great way to handle online business loan disputes. The issue is that the resolution is binding; avoid this if possible.

Hidden Fees in the Contract

Though there are many factors that determine a small business loan interest rate, merchant cash advances usually range between 2 – 12%. It is your responsibility to pay back the principle plus 2 – 12%, whatever is agreed upon.

Some online lenders with add fees which may increase the interest rate by 3 – 4%. For merchant cash advances that are in the 6-figure range, this can really hike up the price of repayment. Be sure to read carefully to spot this hidden fess in online business loan contracts.

Pay attention to late fees and processing fees, as well.


Believe it or not, the methods by which an online lender screens you for the merchant cash advance is important. Online lenders take risks when they provide loans for small businesses, and if they are not doing their due diligence in screening applicants, then buyer beware.

Though not all contracts go into detail, if a contract has detailed a screening system, then it can be inferred that the lender is doing everything above board and maintaining standards. This comes in handy when dealing with the lender long term.