Merchant cash advance industry: what published data shows on cost

This report looks at what published data says about cost surprises, lender choice, approval speed and purpose in the funding market where merchant cash advances compete. It does not size the industry. Every number is quoted from a named public source.

Do borrowers pay more than they expected, and does it depend on the lender type? #

In the 2025 Small Business Credit Survey, 60% of applicants that borrowed from online lenders said actual borrowing costs were higher than expected, and 4% found them lower. Borrowers at small and large banks were less likely to report higher-than-expected costs (37% and 32%, respectively). The survey asks about expectations, not about price, so it does not say what any lender charged.

How many applicants turn to online lenders, and what do they report? #

The share of applicants that sought financing at online fintech lenders rose from 17% in the 2020 survey to 29% in the 2025 survey. Credit union and bank applicants were more satisfied than online lender and finance company applicants. Applicants at online lenders were more likely to experience challenges with their lender, and high interest rates and unfavorable repayment terms were the most common. Applicants at small banks were more likely to be fully approved (57%) than those at other lenders.

How fast can banks approve a small loan? #

The FDIC's survey of banks measured approval times for small, simple loans. The speed of non-bank funding is not measured in these sources.

The same FDIC release notes that very few banks allow borrowers to complete a small business loan application entirely online.

What do owners say they need the money for? #

Among SBCS firms that applied for financing, 56% sought it to meet operating expenses and 46% to pursue an expansion or new opportunity. Of firms that have debt, 59% used a personal guarantee to secure it, while 51% used business assets. A bank loan, SBA loan or line of credit is generally the better fit when the business qualifies and can wait for approval. The survey data above show lower cost surprise at banks and a higher full-approval rate at small banks. A bank is not the better choice when the business cannot meet a bank's underwriting or when the funding is needed sooner than a bank can provide. The sources here do not measure that timing for non-bank funders.

Do owners rely on their own money instead? #

The Federal Reserve's nonemployer chartbook reports that nonemployer firms were more likely than employer firms to rely on their owners' personal funds to address financial challenges (64% and 54%, respectively). It also reports that 31 percent of nonemployer firms did not regularly use external financing. Owner funds are a third path next to bank and non-bank borrowing.

What this report does not measure #

No source here measures the size of the merchant cash advance industry, its funding volume, default rates or the role of brokers. None publishes a company list or a count of direct lenders. None publishes factor rates; a factor rate is a multiplier on the advance, not an interest rate, and any figure of that kind would need an APR equivalent beside it. The SBCS groups merchant cash advances with loans and lines of credit in its application question and reports on online lenders as a category, so its figures describe a wider group than merchant cash advance providers. The FDIC figures cover banks only.

@techreport{holdbackmonitor2026merchantcashadvanceindus,
  title        = {Merchant cash advance industry: what published data shows on cost},
  author       = {{Holdback Monitor}},
  institution  = {Holdback Monitor},
  year         = {2026},
  month        = {nov},
  url          = {https://holdbackmonitor.com/reports/merchant-cash-advance-industry-what-published-data-shows-on-cost},
  note         = {Covers 2025 SBCS; 2022 FDIC survey}
}