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Small Business Owner Guide to Merchant Cash Advance (2024 Guide)

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What is Merchant Cash Advance

Merchant Cash Advance (also known as Business Cash Advance) is an easy and quick way to finance your business without taking a traditional bank loan. MCA allows you to access funds against your future Card Sales. It is designed for businesses that accept Card Payments. The amount of MCA depends upon the volume of your Monthly Card Transactions. Repayments are collected as a fixed percentage of each future sale until the advance is fully settled.

Is Merchant Cash Advance Right for Small Businesses?

It is an ideal financial solution for small businesses with low assets or limited credit history and a good volume of credit card transactions. SMEs including retail stores, restaurants, and service-oriented businesses are best suited for using MCA as a funding option. With Merchant Cash Advance, you can inject anywhere from £2,000 to 300,000 into your business within days.

How to Apply for Merchant Cash Advance as a Small Businesses

As a small business looking for quick funding, you can easily apply for Merchant Cash Advance at Compared Business by following these simple steps:

1 – Apply in under 2 minutes & Get Quotes from Top MCA Lenders Delivered to Your Email

2 – Choose Your Pick & Get Quick Funding through our trusted MCA Providers

3 – Repay Only When You Sell Through Your Credit Card Sales

How to Apply for Merchant Cash Advance as a Small Businesses

Any Business (or SME) that accepts card payments can apply for Merchant Cash Advance. MCA does not require a Good Credit Rating or SME to put up Security Assets as Collateral.

MCA provider will calculate a factor rate based on the volume of the business’s card transactions and its profitability. A factor rate of 1.2 (or 20p) means the business will return £1,200 for every £1,000 borrowed.

The repayment is taken as a percentage of future card sales (usually 10 – 20 %) until the advance is paid back in full. It means that there are no fixed monthly payments and no fixed timelines. There is no benefit of repaying the advance early.

  • What is a Factor Rate?
  • How much cash can my business borrow?

The factor rate is the premium charged by a merchant cash advance lender. It is determined by the MCA provider and receiver at the time of agreement. It remains fixed until the advance is repaid. It is set at fixed pennies per pound on the advance taken. For example, a factor rate of 1.2 (or 20p) means that for every £1,000 borrowed, you pay back £1,200 from your future card sales.

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 higher risk with your business.

The borrowing amount for a Merchant Cash Advance depends on your business's credit card sales volume. MCA providers typically consider your past few months of credit card sales and profitability to determine the total amount you can borrow. This amount can range from a few thousand to over a hundred thousand pounds.

Is Merchant Cash Advance same as a Business Loan?

Merchant Cash Advance is different from Traditional Business Loans in the following ways:

Merchant Cash Advance Business Loan
Flexible Repayments
Security Assets Required
Fixed Term
Quick Funding

Merchant Cash Advance: Pros and Cons


  • Fast Access to Funding:
  • No Security Assets Required
  • Flexible Repayment Schedule
  • Easy Approval Process
  • No Fixed Monthly Payments
  • Pay as you Sell to Your Customers
  • Good Credit Rating Not Required


  • Expensive as compared to traditional business loans
  • Short Term Solution
  • Impacts Business Cash Flow
  • Doesn’t help in building Credit Rating
  • Accepting Card Payments is a prerequisite for MCA

Selecting the Best Merchant Cash Advance Provider

While selecting the Merchant Cash Advance Lender, you should look for:

Cost of Advance: Cost of the advance is the most important factor. As an SME, you should consider what option best suits your budget and needs.

Reputation and Credibility: Always choose the MCA lender with a good reputation and credibility.

Transparency: Choose a lender who is transparent in communicating terms of advance, factor rate, repayment details, and any additional fees.

Flexible Terms: Look for MCA providers who offer flexible payment terms.

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Which Businesses Could Use Merchant Cash Advance?

Merchant Cash Advance can be used for businesses belonging to the following sectors:

  • Retail businesses
  • Restaurants, pubs & bars
  • Salons & spas
  • Healthcare clinics
  • Automotive businesses
  • Hospitality businesses
  • Gyms & fitness centers
  • E-commerce stores
  • Service providers

Frequently Asked Questions About Merchant Cash Advances

To be qualified for Merchant Cash Advance, here are three basic requirements:

  • Your business receives payments through card terminal machines
  • Good volume of card transactions
  • Profitability to show that you can repay the loan

MCA is an ideal solution for your business if it needs quick funding, has a good volume of credit card sales, and you are comfortable paying some extra costs to get quick cash. MCA is often used for short-term funding needs and is usually more expensive than traditional loans.

No, MCAs don’t have fixed monthly payments. Repayments are made as a percentage of your daily, weekly, and monthly credit card sales (usually 20-30%). This means your repayments will vary based on your sales volume.

Yes, it’s possible to obtain an MCA with a bad credit rating. MCAs are primarily based on the sales performance and profitability of your business rather than your credit score.

Written by:

Henry Baker
Henry Baker
Henry Baker, an adept financial & business copywriter in England, boasts a decade-long career collaborating with top-tier UK financial institutions. Renowned for his skill in translating intricate finance into captivating content, he's a trusted authority in simplifying complex concepts for diverse audiences.