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What is a Merchant Cash Advance?
A Merchant Cash Advance (MCA) is an unsecured finance option that is generally short-term and flexible. It can help with cash flow management, business growth, refurbishment or purchasing stock.
Merchant Cash Advance loan offers include an agreed total repayable amount. This amount is based on your business’s annual revenue to ensure manageable repayments, and you only pay as you earn. With a Merchant Cash Advance, you make repayments as a fixed percentage of revenue through your card machine (PDQ terminal).
This type of finance suits any business that regularly uses PDQ (Process Data Quickly) transactions, such as retail, eCommerce or hospitality. Repayment time depends significantly on the amount of revenue you earn, making APR comparison difficult.
Benefits of Merchant Cash Advance
Pay back as you earn
Finance from £2,500 to £500,000
Quick access to funds
Easy repayment
How Does a Merchant Cash Advance Work?
If approved for a Merchant Cash Advance, you'll likely receive up to 85% of your average month’s income as a cash advance in a lump sum.
You'll then need to repay this advance at an agreed percentage per customer or business card transaction. Repayments are automatically sent to the lender as you make sales, which makes repaying the loan simple and avoids issues of missing payments.
Because you only ever pay off the agreed percentage of your sales, if you have a day of high sales, you pay more than on a day when you take less money. However much you pay day-to-day, you'll receive regular statements, so it's easy to track how much of your cash advance you've paid off.
What Businesses use Merchant Cash Advance?
Due to how quick and easy it is to set up and manage, many different types of businesses choose Merchant Cash Advances as their preferred form of Business Finance.
Businesses often choose a Merchant Cash Advance because it's fairly easy to secure, as opposed to a bank loan or even an overdraft.
The sorts of businesses that use Merchant Cash Advance include:
Retail
Pubs and Restaurants
Automotive Services
Hotels
Health and Beauty
Automotive Industry
Other high street stores
What do I Need to Know About Merchant Cash Advances?
The amount you can borrow is based on the revenue, but typically you can borrow up to £100,000.
Unlike most Business Loan solutions, your repayment amount is decided upon beforehand. Subsequently, you could agree on a repayment of £13,000 on a £10,000 loan. The only variable is the time it takes you to make the repayments, which will depend on your revenue.
There may be times when you need to quickly improve your business cash flow to invest in growth or simply to stay afloat. A Merchant Cash Advance (or Business Cash Advance as it is sometimes known) is one option that many companies, especially in the retail and hospitality sectors, due to how quick and easy it is to gain access to funds and repay.
What are the requirements?
To qualify for this type of loan, you need to use a PDQ (Process Data Quickly) card machine terminal for credit and debit card payments.
You will also be required to provide lenders with:
Evidence of a minimum average customer spend per month (this will vary depending on the lender)
A minimum of 12 months of trading statements through your PDQ
Statements such as rent payments for credit assurance
Merchant Cash Advance FAQs
Business Cash Advance is another term for Merchant Cash Advance, meaning it's the same finance product, but some lenders use a different name.
Yes, small businesses are eligible for Merchant Cash Advances. It's important to consider whether a Merchant Cash Advance is right for your business before applying, as you may find that other forms of Business Finance better suit your needs. At BusinessComparison, we can quickly provide options tailored to meet your business financing requirements. All you need to do is provide us with a few details about your business, and we'll do the hard work.
Yes, various lenders in the UK offer Merchant Cash Advance (Business Cash Advance) products. From recognisable high street banks to challenger banks, there are a variety of products offering different benefits.
Merchant Cash Advances are a great way to get funding for your business, meaning there are a few minor disadvantages.
Your Merchant Cash Advance fee (referred to as the factor rate) is set when you apply. It's based on the status of your business at the time. Subsequently, if your business experiences a boost in performance, you'll still pay the same fee.
As a Merchant Cash Advance lender only considers your card machine receipts, any cash, cheque, or bank transfer transactions your business makes won't qualify. Equally, if you need a loan that significantly exceeds your card payment turnover, you may want to consider an alternative business loan.
In addition to these points, you may find that the cost of a Merchant Cash Advance is slightly higher than other forms of Business Finance.
Compare Merchant Cash Advance with Us
At BusinessComparison, we make finding suitable finance options for your business quick and easy. By taking a few minutes to enter a few details about your business, we can quickly provide you with finance options tailored to meet the needs of your business
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