Merchant Cash Advance Fund
Provide short-term capital to small businesses in exchange for a share of daily card sales.
How it typically works
- A fund manager originates or purchases a portfolio of loans, receivables, or contractual claims from businesses that need short-term capital.
- Investor capital is pooled and deployed across many individual positions to diversify single-borrower risk.
- The manager collects on the underlying obligations — repayments, discounted receivables, or settlement proceeds — as they come due.
- Returns are distributed to investors as income, often on a monthly or quarterly cycle, net of manager fees.
Why investors consider it
- Short duration relative to real estate or private equity, since many underlying positions resolve in months rather than years.
- Returns are less correlated to public stock and bond markets, since they depend on operating cash flow of borrowers rather than market sentiment.
- Yields are often higher than traditional fixed income to compensate for the specialized, less liquid nature of the lending.
Key risks to understand
- Credit and default risk — borrowers or counterparties may fail to repay in full or on time.
- Limited transparency — underlying loan books are not publicly traded and disclosure varies by manager.
- Illiquidity — capital is generally locked up for the fund term with no ability to sell your position on an exchange.
Who this is generally for
This structure is limited to accredited investors under SEC private-placement rules — generally those meeting certain income or net-worth thresholds. Sponsors are required to verify eligibility before accepting capital.
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This page is general educational information about a category of alternative investment structures. It is not investment advice and not an offer to sell securities. Availability, minimums, eligibility requirements, and terms vary by sponsor and change over time — confirm current details directly with any specific offering before committing capital.