Individual investors usually invest in merchant cash advances by syndicating with a funder: you open a wallet with the funder, deposit capital, and take a percentage share of individual advances the funder originates. Each deal repays daily or weekly, and your share of collections, minus fees, returns to your wallet to be redeployed or withdrawn.
Step by step
- Choose a funder that offers syndication to outside investors and complete their investor paperwork.
- Fund a wallet — the account the funder holds your uninvested cash in.
- Take a participation (often 5%–25%) in each deal you accept. That percentage of the advance leaves your wallet.
- Collections arrive as the merchant pays. Your share, less management fees, lands back in the wallet.
- Redeploy the returning cash into new deals, or withdraw it.
What you actually own
You are not making a loan. A merchant cash advance is a purchase of a business's future receivables at a discount, and your participation is a share of that purchase. The total you are owed on a deal is the advance multiplied by the factor rate, known as RTR (right to receive).
There is no fixed maturity date. A deal ends when the full RTR is collected, when it is settled, or when the funder writes it off.
What to watch once your money is out
- Percentage paid on every open deal, against the time it has been running.
- Capital deployed versus idle wallet cash — idle cash earns nothing.
- Defaults and write-offs, which are the main drag on returns.
- Fees taken from collections before the cash reaches your wallet.
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More terms in the MCA glossary or run a deal through the MCA calculator.