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What Is Merchant Cash Advance?
A Merchant Cash Advance (MCA) offers a straightforward funding option without relying on a traditional bank loan. In MCA, you receive capital based on your upcoming card sales. This type of financing is ideal for businesses that regularly process card payments. The advance amount is determined by the amount of your monthly card transactions. Repayments are made through a set percentage of future sales until the full amount is paid off.
This funding method works particularly well for small businesses that have limited assets or a short credit history but generate strong credit card sales. SMEs such as retail shops, restaurants, and service-based companies are typically the best fit for an MCA.
With a Merchant Cash Advance, businesses can access between £2,000 and £300,000 in just a few days. It provides fast capital without collateral and comes with flexible repayment terms.
How Merchant Cash Advance Works
Get Quotes from top MCA lenders delivered to your email
Choose your option & get access to instant capital
Repay when you sell through your credit card sales
Merchant Cash Advance vs A Business Loan
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Fixed Term |
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Flexible Repayments |
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Security Assets Required |
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Quick Funding |
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What Are the Merchant Cash Advance Costs?
Merchant Cash Advances come with no upfront charges or hidden fees. Repayments are simply taken from the business’s future card sales. A set percentage of each card transaction is sent to the lender until the full amount is cleared, which means there is no fixed repayment period. The overall cost of an MCA is defined by the factor rate, which both parties agree upon when the offer is made. A factor rate of 1.2 indicates that for every £1 you receive, you must repay £1.20.
For example, if you obtain £500 at a 1.2 factor rate, you will repay £600 through your upcoming card sales.
The factor rate is the cost of service charged by a merchant cash advance lender. The MCA provider & receiver decide this at the time of agreement. It remains fixed until the advance is repaid. It is calculated as fixed pennies per pound on the advance taken. For example, a factor rate of 1.2 (or 20p) means that for every £1000 borrowed, you pay back £1200 from your future card sales.
The factor rate depends upon the business credit rating, volume of credit card sales, and profitability. A higher factor rate indicates that the MCA provider is associating a higher risk with your business.
To be qualified for a Merchant Cash Advance, here are three basic requirements:
- Your business should be accepting payments through a card machine.
- A healthy volume of card transactions.
- Show enough profitability to comfortably repay the advance.
Access funds quickly
No Security Assets Required
Flexible to your needs
Transparent Fees
Increase Cash Flow
Reduce Bad Debt
How To Compare The Best Merchant Cash Advance Providers?
You should keep in mind the following factors while looking for a Merchant Cash Advance (MCA) provider:
- Cost: The UK finance market is highly competitive, so if a provider offers a factor rate that doesn’t fit your budget, continue exploring other options. You’ll likely find a lender whose offer aligns with what you can afford.
- Factor Rate: Before choosing a lender, compare their factor rate with those from other companies to make sure you’re getting the most favourable deal.
- Reputation: Before signing up with a lender, research its reputation and customer service, as you want to work with a trustworthy company. Check feedback and reviews from their previous clients. Positive reviews will give you reliability, and you can also get an idea of their work ethic.
- Speed of Funding: Lastly, think about when you need the money and how quickly each lender can deliver it, as some providers offer much faster access to funds than others.
Sectors Merchant Cash Advance Covers
Retail
Mechanics
Restaurants
Bars & Clubs
Leisure Clubs
Plus Many More
How Strict is the Credit Check for MCA?
The credit check for MCA funding is not strict at all. Merchant cash advance focuses on the business’s sales history and potential future sales instead of its credit history. However, a soft credit check is done, which analyses the following things:
- How your business deals with debts or financial situations
- Your financial details, like existing loans
- Any mortgages, debts, or traditional bank loans
- Record of your spending
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Merchant Cash Advance FAQs
The amount you can get through a Merchant Cash Advance is based on the volume of your credit card sales. Lenders usually review your recent months of card transactions and check your profitability to decide the total advance available. The final amount depends on your sales performance, so it could range from several thousand pounds to well over one hundred thousand.
One of the main advantages of a Merchant Cash Advance is speed. Once your application is approved, businesses can receive the funds within a few days (24-72 hours).
No. In MCA, repayments are made as a percentage of your daily, weekly, and monthly credit card sales (usually 10-30%). This means your repayments will vary based on your sales volume only. MCAs don’t have fixed monthly payments.
Yes, it’s possible to obtain an MCA with a bad credit rating. That is because MCAs are based on the sales performance and profitability of your business rather than your credit score.
An MCA can be a great option if your business requires fast access to cash, generates strong credit card sales, and you’re willing to pay a slightly higher cost for quick funding. It’s commonly used for short-term financial needs and has a higher overall cost compared to traditional bank loans.
Merchant Cash Advance is an unsecured form of lending, which means you do not need assets or a great credit rating in order to have the advance. This makes Merchant Cash Advance a suitable option for Small Businesses.