Percentage of Merchants Seeking MCAs in 2022 Waned But Approval Rate Went Up

Only 7% of small businesses that applied for financing in 2022 applied for a merchant cash advance, according to the most recent report published by the Federal Reserve. Of those, 90% reported being approved for some amount of capital. That’s up from the 84% in 2020 and up from the 87% reported in 2019 prior to the pandemic. Approvals, it appears, were quite generous in 2022.

Overall, the percentage of merchants seeking MCAs has dipped, however. In 2019 for example, 9% of businesses said that they were seeking an MCA. In 2021 it was 8%. In 2022 it was 7% as mentioned above. The decrease could be explained by the pandemic which introduced an abundance of free and low interest government business aid. Also, the proliferation of low-cost online lenders created by the 0% interest rate environment may have weakened demand for alternatives like MCAs. Given that much has changed in the last 4 months, the Fed’s next report (scheduled for release in approximately March 2024) stands to be much more informative.

The most recent report can be downloaded here.