ISO merchant cash advance: What is it and should you get one?

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Ask a Lender
November 10, 2017 | Updated November 17, 2017


Key Points

About ISO merchant cash advances

  • Independent sales organizations (ISOs) equip businesses to accept credit- and debit-card payments
  • ISOs may offer merchant cash advances (MCAs), among other financial services
  • Taking out an MCA from an ISO allows you to consolidate services

If your small business needs financing to purchase equipment, make payroll or fund other costs, you may have looked into a merchant cash advance as one way to finance expenses. Cash advances are available from a variety of companies, including independent sales organizations (ISOs), sometimes known as member service providers. Merchant cash advances offered by ISOs can be an excellent financing option for businesses, especially if they have an existing relationship with an ISO that facilitates their credit- and debit-card sales.

What is an ISO?

An independent sales organization, or ISO, is a merchant service provider that equips businesses to accept credit and debit cards as payment, whether in a physical store, over the phone or online. ISOs offer third-party services on behalf of credit card processors. Processors are typically large organizations either associated with a bank, or which have spun off of a bank.

ISOs do not perform merchant transactions themselves and so are not subject to the same regulations as banks. In addition to equipping businesses with credit card processing equipment, ISOs may offer a host of financial products and services, including merchant cash advances. If an ISO is providing you with credit-card payment services, it may make sense to also contact the provider about obtaining a merchant cash advance.

ISO merchant cash advances

When businesses take out a merchant cash advance, they receive a sum of money upfront. In exchange, the servicer of the cash advance is repaid over time by collecting a portion of the business’s future credit- and debit-card sales.

Although they should be used judiciously, merchant cash advances can help businesses with a variety of endeavors, such as hiring new employees, buying equipment or purchasing additional inventory.

The primary reason one would consider taking out a merchant cash advance through their ISO is convenience. If you already have a relationship with an ISO, it saves you the trouble of establishing a relationship with a lender or other provider.

Note, however, that the ISO is not the financial entity funding the cash advance. Rather, ISOs partner with an institution that funds the loan — typically a bank, a private lender, or a broker who shops a merchant’s application to several lenders. The ISO receives a referral fee for its efforts.

Merchant cash advances can be quicker to fund than business loans, and are typically available to businesses with poor credit. Although you won’t be expected to provide as much documentation as you would if taking out a business loan, the lender will need to evaluate your business’s credit card transaction history. If they’re adequate to pay back the cash advance, the lender will ask you to sign an agreement, and you can expect to receive the funds in a matter of days.

Before taking out any kind of merchant cash advance, however, do some research to see if better alternatives may be right for your business. Many alternative forms of financing exist, including invoice factoring, business loans and business lines of credit.

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