A merchant cash advance company does not charge an interest rate at all, which is exactly how it charges what it charges. The agreement is written as a purchase of future receivables for a discounted price, expressed as a factor rate, and a factor rate is not interest, and interest is the only thing the usury statutes know how to cap. So the question of whether an MCA company can charge any rate it wants begins with a stranger answer than the owner expects: there is no rate on the page to limit.
This is why owners ask whether usury laws apply to merchant cash advances, and the honest reply is that they do not apply to a purchase and they apply with full force to a loan, and the entire fight is over which of the two the agreement actually is. A purchase that the funder dressed in the costume of a sale, that adjusted to receipts only on paper, that demanded a fixed sum no matter how the week went and absorbed no risk if the business failed, is the kind of purchase a court has been willing to call a loan in substance, at which point the usury cap it had escaped snaps back into place and the obligation that looked merely expensive becomes, in part, void.
The Factor Rate Is A Costume
Picture a man who sells you a winter coat and writes the receipt as a lease, so that the price is not a price and the law of sales never reaches it. The factor rate works that way. It renames the cost so the cost falls outside the statute, and the rename holds right up until someone with authority reads the conduct instead of the caption.
An owner told me his contract had no interest rate, as though that settled it in his favor. I told him it settled nothing, and that the absence of a rate was the funder's defense, not his.
When The Cap Comes Back, It Comes Back Hard
And when a court does recharacterize, the consequence is not a refund of a few points. The New York Attorney General sued Yellowstone Capital and roughly two dozen related entities on the theory that the advances were disguised usurious loans, and in December 2024 the matter resolved in a consented judgment of $1.065 billion, with about $534 million in merchant balances canceled outright. That is what a returning usury statute can do to a portfolio. A single owner is not a portfolio, but the same logic that canceled those balances is the logic that gives a single owner room.
So can a merchant cash advance company charge any rate it wants. As long as the purchase label survives, there is no rate to challenge, only a factor rate the usury laws cannot see. Break the label and the laws return and the price the funder set so confidently becomes the funder's exposure. What is the most an MCA may charge. The contract answers one way and the conduct may answer another, and the owner who wants the second answer reads his own agreement first. The costume is on the page. So is the seam.