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What Is Merchant Cash Advance?

Merchant Cash Advance (MCA) 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.
Merchant Cash Advance

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 MCA.

With Merchant Cash Advance, you can inject anywhere from £ 2,000 to £300,000 into your business within days. MCA offers quick funding with no security assets required as collateral with flexible repayment options.

How Merchant Cash Advance Works

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Repay when you sell through your credit card sales

Merchant Cash Advance vs A Business Loan

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

What Are the Costs of Merchant Cash Advance?

  • How much does an MCA cost?
  • What is a factor rate?
  • Am I Eligible For Merchant Cash Advance?

There is no upfront payment or hidden cost associated with MCA. You just have to pay from your future card sales. A percentage from your future card transactions goes to the lender until the advance is repaid, hence there is no fixed timeframe as well. The total cost of Merchant Cash Advance is determined by Factor Rate. The Factor Rate is set by both parties at the time the MCA offer is made. A Factor Rate of 1.2 means that you have to return £1.2 for every £1 you took as MCA.

For example, £1000 borrowed at the factor rate of 1.2 means you pay back £1200 from your future card sales.

The factor rate is the premium charged by a merchant cash advance lender. It is determined by the MCA provider & 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 £1000 borrowed, you pay back £1200 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.

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

Key Benefits of merchant Cash 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 finance industry in the UK is very competitive. If you are offered a factor rate outside of your budget, keep looking for others. There’s a high chance you’ll find a provider within your budget. 
  • Factor Rate: Before starting to work with one lender, compare its factor rate with the ones offered by other lenders to ensure that you’re getting a good deal.
  • Reputation: Before signing up with a lender, research its reputation and customer service, as you want to work with a trustworthy company. Look for 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: Finally, consider when you need the funds and how quickly you can receive them, as some lenders may be able to provide funding faster 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. Lenders or financial companies perform a soft credit check to see if you’re eligible for the funding. Merchant cash advance focuses on the business’s sales history and potential future sales instead of its credit history.

This credit check 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 
  • History of your spending

Why ComparedBusiness

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Merchant Cash Advance FAQs

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.

No, MCAs don’t have fixed monthly payments. 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.

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.

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.

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.