According to a new report published by Allied Market Research, titled, “Merchant Cash Advance Market, By Repayment Method (MCA Split, Automated Clearing House (ACH), MCA Lockbox), By Application (IT and Telecom, Healthcare, Manufacturing, Retail and E-commerce, Travel and Hospitality, Energy and Utilities, Others): Global Opportunity Analysis and Industry Forecast, 2023-2032". The merchant cash advance market was valued at $17.9 billion in 2023, and is estimated to reach $32.7 billion by 2032, growing at a CAGR of 7.2% from 2024 to 2032.

A merchant cash advance (MCA) market is a short-term financing option in which a business receives a lump sum of funding and pays the money back incrementally. A percentage of the company’s daily or weekly credit or debit card sales is normally deducted as repayment for the funding.

The merchant cash advance industry is quick to embrace technological advancements. As financial technology, or fintech, continues to evolve, it has introduced innovative solutions that enhance the efficiency and accessibility of MCAs. One such instance is the integration of artificial intelligence (AI) and machine learning algorithms to automate the underwriting process, resulting in faster approvals and more accurate risk assessments. While traditional financial underwriting can create a one-size-fits-all approach that overlooks many businesses, fintech-enabled MCAs can analyze revenue patterns and determine the eligibility of a wide range of businesses almost instantly, which drives the merchant cash advance market growth.

In the U.S., several states passed new MCA regulations, concerning disclosure and registration requirements for non-bank funders. In January 2022, New York passed a disclosure law that requires non-bank funders to provide specific disclosures in the loan paperwork for corporate and small enterprise borrowers. Similarly, California enacted Senate Bill 1235, requiring the cost of credit disclosures to borrowers whose business is directed or managed from California. Furthermore, DoorDash, the food delivery business, ventured into the merchant cash advance market business. By partnering with Parafin (a fintech business lender), they currently offer quick cash advances to restaurants based on their potential future sales. In addition, in November 2022, Amazon also partnered with Parafin to launch an MCA program for its sellers. The program allowed eligible U.S.-based businesses on Amazon’s platform access to capital within a few days with no fixed term, no personal guarantee, no credit checks, no late fees, and no collateral requirements. With a payment schedule determined by a fixed percentage of their gross merchandise sales, businesses can access capital from $500 up to $10 million. Therefore, these key development trends accelerated the growth of the merchant cash advance market size.

By repayment method, the MCA split segment acquired a major merchant cash advance market share in 2023. This is attributed to the fact that this method of repayment where a fixed percentage of daily credit card sales is automatically remitted to the lender, makes it a convenient and flexible option for businesses with fluctuating sales. Furthermore, the growing demand for alternative financing options among small and medium-sized enterprises (SMEs) is driving the growth of the MCA split segment. SMEs often face challenges in securing traditional bank loans, making merchant cash advances an attractive alternative. However, the automated clearing house (ACH) segment is expected to be the fastest-growing segment in the merchant cash advance market forecast period. This method involves the automatic withdrawal of funds from a borrower's bank account to fulfill the repayment obligation. It offers convenience and reliability for lenders by ensuring timely repayments without relying on the borrower's manual initiation of payments. Moreover, it provides a structured and automated repayment process, reducing the risk of missed or delayed payments. This method is often favored by MCA providers as it offers a predictable and consistent collection of repayments, enhancing cash flow predictability and reducing administrative burdens associated with manual payment collections.

By application, the retail and e-commerce segment acquired a major share in the merchant cash advance market in 2023. Retail and e-commerce businesses often turn to MCAs to navigate fluctuations in cash flow, capitalize on inventory procurement opportunities, or invest in marketing campaigns to bolster sales. The ability to obtain funding swiftly, often without the stringent requirements of traditional loans, makes MCAs an attractive choice for businesses in this sector, allowing them to adapt rapidly to market changes and seize growth opportunities. However, the IT and telecom segment is expected to be the fastest-growing segment in the merchant cash advance market forecast period. This is attributed to the increasing demand for alternative financing options, the growth of small and medium-sized enterprises (SMEs), and the increasing use of technology in the financial services industry. The merchant cash advance market provides a flexible financing option for SMEs in the IT and telecom sector, which often face challenges in securing traditional financing options.

Region-wise, North America dominated the merchant cash advance market in 2023. This is attributed to the increasing number of retailers seeking out short-term credit facilities to help cover short-term credit needs, as well as the capital markets tightening and banks becoming increasingly interested in alternative sources of income. However, Asia-Pacific is considered to be the fastest-growing region during the forecast period. This is attributed to the growing demand for alternative financing options and the growth of small and medium-sized enterprises (SMEs), as well as the increasing use of technology in the financial services industry.

Merchant cash advance market trends have become increasingly popular among SMBs due to their accessibility and speedy approval process. Unlike traditional lenders, MCA providers don’t force business owners to jump through hurdles such as heavy paperwork, collateral requirements, and other challenges, instead making funding accessible to a broader range of businesses.

Key Findings of the Study

• By repayment method, the MCA split segment held the largest share in the merchant cash advance market in 2023.
• By application, the retail and e-commerce segment held the largest share in the merchant cash advance industry in 2023.
• Region-wise, North America held the largest market share in 2023. However, Asia-Pacific is expected to witness the highest CAGR during the forecast period. 

The key players operating in the merchant cash advance market analysis include CAN Capital, Inc., Fundbox, Kalamata Capital Group, Lendio, Libertas Funding, LLC, National Business Capital, OnDeck, Perfect Alliance Capital, Rapid Finance, and Reliant Funding. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.