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The Merchant Cash Advance – Accounting (A Bit) Demystified.

Updated: Feb 15, 2022

By Thomas W. Tramaglini, Managing Director at BRP Onesta

It is tax time and once again we have seen the IRS go after several of our loan origination clients because they reported their MCAs as liabilities (Merchant Cash Advances), not correctly accounting for the MCA as income. In some cases, the back taxes and penalties have been significant (over $100,000). Small business owners should take the accounting of Merchant Cash Advances into consideration before they file their taxes, especially bringing in their accountant for their opinion as it may make a rather huge difference.


There is certainly some misunderstanding of what Merchant Cash Advances are and how they differ from loans so my attempt with this article I am writing aims to clarify a bit what MCAs are versus what loans are and more importantly, generating an accurate accounting of Merchant Cash Advances in a small business’ books.

Further, most states require businesses to ensure that they have their liabilities and assets balanced in one way or another and we have seen many a business owner exposed with not accounting for Merchant Cash Advances in their books accurately. As demonstrated above and from numerous interactions with our clients and small business owners, it is important to grasp the concept of an MCA and the implications of an MCA with regards to the IRS.

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