Getting out of a merchant cash advance or daily-debit loan

A merchant cash advance takes a share of card settlements; a daily-debit loan takes a fixed amount from the bank account whether the takings arrived or not. Cancelling the debit does not cancel the debt and is usually a default. The way out is a written payout figure and one repayment that clears it.

Two different products, talked about as one

The money leaves the account the same way every morning, so the two get run together in the telling. They are not the same thing and the difference decides what you can do about it.

A merchant cash advance is usually documented as a purchase rather than a loan: the provider buys a share of the business's future card receipts at a discount, and takes its share out of the card settlements as they arrive, often through the terminal or the acquirer rather than through your bank account at all. That is why the cost is quoted as a factor, or as cents in the dollar, and not as a rate. It is also why the figure owing behaves nothing like a loan balance: it was set at the start, and trading harder gets you to the end sooner without getting you there cheaper.

A daily or weekly debit facility is the other animal — an ordinary loan with a term, repaid by a fixed amount pulled from the account on a fixed day, whichever way the week went. The cruelty of it is the fixedness. A quiet fortnight does not reduce the debit; it just means the debit lands on a thinner balance, and a dishonour fee lands on top of that.

You are not the first one this week

Nearly everybody in this position asks their bank first, and the bank says no. Not because the loan would not be repaid, but because the last financials look wrong, a lodgement is late, there is a mark on the credit file, or the bank statements now show three debits a week going to names its credit team recognises. Those are the things a bank exists to care about. None of them says anything at all about whether there is equity in the building.

That gap is where HomeSec has been since 2004. We are not here to judge how the business ended up with the facility — plenty of good businesses took one because it was the only thing available in the week they needed it, which is also why we write about business loans for borrowers with bad credit. What we look at is whether there is enough unused equity in real property and whether the purpose is a genuine business one: not financials, not a credit score, not whether everything is up to date, and no interrogation about the last two years. From a clean, complete scenario funds can be available in as little as 24 hours, and interest can be capitalised for up to six months, so the business is not trading one daily deduction for another the week after settlement.

Back to the facility, because the first job is finding out exactly what it is taking.

Find out what is actually leaving the account

Owners in this position are often not certain how many facilities are debiting, on which days, or under which trading names — the names on a statement rarely match the names on the contracts. The Banking Code of Practice gives you a way to settle it in one phone call. A subscribing bank will, on request, provide a list of your direct debits and recurring payments for up to the previous 13 months. It only covers the ones the bank can see in its own transaction data, which is exactly the list you want. Ask for it before you do anything else, and put the debits in date order next to the contracts.

Then the question everybody asks. The same Code says you can ask the bank to cancel a direct debit request and it will promptly process that, and that you can ask it to investigate an unauthorised direct debit. Two things make that less useful than it sounds. A recurring payment taken from a debit or credit card is a different mechanism, and the Code says cancelling that must be done by contacting the merchant or provider directly. And where a merchant cash advance is collected as a share of card settlements, the money never arrives in your account to be debited out of it, so there is nothing in your banking to cancel.

The more important point is the one that has nothing to do with mechanics. Stopping the money does not stop the obligation, and in nearly every one of these contracts it is an event of default in its own right — which converts a cash flow problem into an enforcement problem, against a company whose assets are very likely already registered to that lender. If the debit genuinely cannot be met, the move is to tell the lender before the dishonour rather than after it. Both the Finance Industry Code and the older online lenders' Code expect a borrower in or near default to make contact and ask, and the newer Code commits a lender to considering reasonable modifications to repayment arrangements. It does not promise one.

What "unsecured" turned out to mean

This is the part that shocks people, and it is the part worth checking today whatever else you do. Unsecured, in this market, generally means no mortgage over land. It does not mean no security.

The AFIA Finance Industry Code describes the structure plainly: a lender may take a general security agreement, which creates a security interest in the business's present and future assets, and such an agreement must be registered on the Personal Property Securities Register. The same schedule says a personal guarantee may be required even for an unsecured loan, and that under a secured loan you may be personally liable for the business's debts if it defaults. Nobody reads those three sentences until the week they matter.

You can check it yourself for the price of a coffee. An organisation grantor search of the register shows whether anyone has registered an interest in the company's assets — a self-service search online costs $2.00, and the certificate is a legal record of what was registered and by whom. Use the highest identifier the company has, which for most companies means the ACN rather than the ABN, and remember the search only covers the identifier you enter. What the register will not tell you is the value of any interest, so the search answers who and in what order, not how much.

Do it before you talk to anybody about refinancing. A registration you did not know about is the single most common reason a refinance of these facilities stalls in its last week.

Which code, if any, covers your contract

Credit taken wholly or predominantly for business purposes sits outside the NCCP Act, so the protections consumer borrowers have are not there. What a business borrower has instead is the contract, the unfair contract terms law, and a voluntary code where the lender has signed one. That last part changed nine days ago and almost nobody has noticed.

1. 1
   The new Code took effect on 1 October 2026.The AFIA Finance Industry Code of Practice was published on 16 September 2025 and is effective from 1 October 2026 — the first industry-wide code for the non-bank lending sector, with a schedule for small business finance and a product list that includes debtor and cashflow finance.
2. 2
   It probably does not cover the facility you already have.The Code applies to products and guarantees entered into on or after that date. Existing products keep their existing terms, although revised terms given to you after it must comply. A facility written in 2025 is governed by what you signed in 2025.
3. 3
   The older code still runs, for a short list of lenders.The Online Small Business Lenders Code commenced on 30 June 2018 and continues to operate during the transition, and AFIA records its current version as effective from 12 September 2024. It binds only those approved as Code Compliant Members, and AFIA currently lists two of them. If your lender is not one, it has not signed anything.
4. 4
   That older code is where the pricing disclosure lives.It requires a standard pricing comparison before the contract is made, setting out the loan amount, the disbursement amount, the total repayment amount, the average repayment amount, the term, the total cost of credit including interest expense, origination fee and other fees, and the annual percentage rate. If you were given one, it is the clearest statement of what the facility costs that you are ever going to get. The newer Code's own disclosure list for a term loan does not include an annual percentage rate.
5. 5
   Neither code promises you a discount for paying early.The older one requires the documentation to say whether early repayments can be made and whether any reduction to the total payable applies. Saying so is the obligation; offering a reduction is not.

Both codes do say that fees charged after the money is advanced — late payment fees and direct debit dishonour fees among them — have to be reasonable relative to the lender's costs. The newer Code also commits a lender to using reasonable endeavours to give 30 calendar days' notice before it changes the product or key terms, and generally to issuing a notice to remedy a default, where it can be remedied, before it demands the whole balance or enforces.

Dishonour fees, and the terms that may be void

A facility that debits daily against a thin account generates dishonour fees faster than anything else in small business finance, and the fees are often the reason the arrears grow while the principal does not move. Those terms are not beyond challenge.

Since 9 November 2023 unfair contract terms in small business contracts have been illegal rather than merely unenforceable, with penalties attached, and each unfair term counts as a separate contravention. A contract is a small business contract where the business employed fewer than 100 people when it was signed, or had turnover of under $10 million in the last income year — and, for a financial product or service, where the upfront price payable excluding interest is $5 million or less. Nearly every facility of this kind is inside those limits. Where a small business alleges the contract was a standard form one, it is presumed to be standard form unless proven otherwise, which matters because nobody negotiates these.

The test asks three things of a term: whether it causes a significant imbalance in the parties' rights and obligations, whether it is reasonably necessary to protect the legitimate interests of the party it benefits, and whether it would cause detriment if applied. ASIC's own worked example of a term likely to be unfair is a default fee that imposes a cost on the business exceeding what the lender needs to be protected from loss. A term declared unfair is void — treated, in ASIC's words, as if it had never existed — while the rest of the contract carries on without it.

None of which is something to work out alone at eleven at night. It is a reason to put the contract and the fee history in front of a commercial solicitor before you accept that the arrears figure is simply the arrears figure.

The first week, in order

1. 1
   Get the 13-month list of debits from the bank.Every facility, every day, every amount. Until that page exists, nobody — you, a solicitor or a lender — can say what the business is actually carrying.
2. 2
   Work out which product each one is.A purchase of receivables or a loan with a term. The contract will say, and the words purchase, receivables, factor and cents in the dollar point one way while interest, term and schedule point the other.
3. 3
   Ask each lender for a written payout figure for a nominated date.Not the balance, not the portal number: the figure to settle it, on a date you choose, and whether that figure reduces if the date is earlier. Ask for it in writing and keep it, because some of them move weekly.
4. 4
   Run an organisation search of the Personal Property Securities Register.By ACN, for $2.00. Find out who is registered against the company's assets and in what order, before anyone starts arranging a refinance around it.
5. 5
   Find out who gave a guarantee, and for which facility.A guarantee is a separate contract and is not paused by anything that happens to the company. If a spouse signed one, they need to know this week rather than later.
6. 6
   Add up the payout figures and compare them with the equity.One number against another. If the equity covers the total with room, there is a clean way out; if it does not, the honest conversation is a different one and it is better had now.
7. 7
   Tell the lenders before the next dishonour, not after it.Both codes expect a borrower in difficulty to make contact and ask, and a borrower who is demonstrably arranging a payout and says so, with dates, is treated differently from one who has gone quiet.

What a loan can and cannot do here

It can do one thing very well. Where there is unused equity in real property, a facility secured against it can pay out every one of these advances at a single settlement, which stops the debits on the day rather than in six weeks, and replaces a set of daily deductions with one monthly interest payment — or, with interest capitalised for up to six months, with none at all while the trading recovers. That is the whole argument, and it is the reason clearing several facilities at one settlement is the most common thing we are asked to do for a business in this position. Where more than one lender has to be paid out at once, the order of the registrations on the register is what has to be worked through, and that is a settlement question rather than a credit one.

It cannot make a facility cheaper retrospectively. If the cost was fixed at the start as a factor, paying it out early may save very little of it, and that has to be in the arithmetic before anybody signs anything. It cannot stop a guarantee, which stands on its own. And it does not answer the question of why the business needed the advance in the first place — if the answer is a genuine timing problem, a payout fixes it; if the answer is that the business does not make money, it does not. How these facilities are sized and repaid and what a cash flow lender's decline actually tells you cover the ground before this one, and unsecured against secured, side by side covers the choice itself. This page does not restate them.

When borrowing is not the answer

Plainly, because the security on offer here is usually a home and the pressure to act is daily.

ASIC's instruction to a director of an insolvent company is four words long: do not incur further debt. Borrowing is consistent with that where the payout clears the facilities in full, the debits stop, and the business underneath is viable — and not where the business is losing money every month and the advances were the way that loss was funded. Refinancing a loss onto the family's property keeps it running and puts the house beside the company. If that is the honest position, the call to make is to a registered liquidator about small business restructuring or a winding up, and we will tell you so on the first call rather than after a valuation.

Three narrower cases where the answer is also no. If the payout figures together exceed what the equity can support, the arithmetic does not change with structuring, and the better use of the week is a conversation with each lender about a varied arrangement. If paying out early saves nothing because the cost was fixed at the outset, running the facility to its end on a renegotiated debit may cost less than refinancing it. And if the total is below $20,000 we do not lend to it at all — registering security over a property for an amount that size is the wrong tool for the job. The Small Business Debt Helpline on 1800 413 828 is free, independent and confidential, and it is a reasonable first call in any of the three.

This page explains what these facilities are, what the codes of practice say about them and where the unfair contract terms law may apply. It is general information, not legal or insolvency advice: what to do in your circumstances is a question for a commercial solicitor, a registered liquidator or your accountant. The published texts of the AFIA Finance Industry Code of Practice and the Online Small Business Lenders Code of Practice, the Australian Banking Association's 2025 Banking Code of Practice, ASIC's guidance on unfair contract term protections for small business and the Personal Property Securities Register's own instructions are the primary sources behind everything above. Read your own facility agreements and guarantees alongside them.

Reviewed by Catriona Anderson, General Manager