A merchant loan is a specialized business financing option tailored for small business owners based on their credit history. It provides capital that can be used for various business needs such as expanding operations, investing in inventory, or enhancing business capabilities. Unlike traditional loans, repayment is structured through daily installments, typically deducted automatically from the business's daily credit card sales. This structure helps manage cash flow and aligns repayment with business revenue, making it a practical option for businesses with variable income streams.