Merchant Cash Advance

Flexible and Scalable Finance | Easy Repayments

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WHAT IS MERCHANT CASH ADVANCE?

Merchant cash advances are one of the most innovative products in alternative business finance. The concept has only exists for a few years, but its already providing very popular with retail businesses and the leisure sector. Put simply, a merchant cash advance uses your card terminal to ‘secure lending – perfect for businesses without many assets, but who have a good volume of card transactions every month. Repayments are then taken as a proportion of your revenue, making it a quick and easy funding solution for many SMEs.

CAN I GET A MERCHANT CASH ADVANCE?

Any business that uses a card terminal to take payments from customers will have a card terminal provider – the company that processes transactions for them. With a merchant cash advance, the lender works with the terminal provider so they have visibility on whats happening, and how much money is flowing through your business. That means that unlike other types of lending, there’s no need for credit checks or a detailed look into your accounts.

Flexible and Scalable Finance

Cash Advance Repayments are taken proportionally with your business’ income.

Easy Repayments

Repayments taken by the lender at source in the same way most people pay income tax.

Frees up other forms of Finance

Provides a new line of credit to your business, so you can better utilise other funding options.

ADVANTAGES OF A MERCHANT CASH ADVANCE

FAQ's

A merchant cash advance is, essentially, a type of unsecured business loan. As with a traditional business loan, you borrow money from a provider and then pay that sum back.

However, a merchant cash advance is specifically for businesses with a high volume of customer debit and credit card transactions. You borrow a lump sum and then, instead of making a fixed monthly repayment, pay off the merchant cash advance through a pre-agreed percentage of your future customer card payments.

This means that your repayment plan is flexible and can accommodate the ebbs and flows of your trading. If you have a busy period, you will pay off your merchant cash advance loan more quickly. If trading is slow, however, you will repay less – you won’t need to find money that you don’t necessarily have to pay off a fixed amount.
Instead of an interest rate that you would typically get on a traditional business loan, merchant cash advances are charged at a fixed rate of pennies per pound borrowed. This is called the factor rate and is mostly displayed as a decimal figure, such as 1.2 or 1.4.

To work out how much you will need to repay overall, the lender will multiply the amount you are borrowing by the factor rate. So if you took out a merchant cash advance of £10,000 at a factor rate of 1.4, you would pay £4,000 in fees on top of the sum borrowed, making a total of £14,000.

The factor rate will be determined by your lender, based on your business sector, and your business’s health and performance.

Instead of an interest rate that you would typically get on a traditional business loan, merchant cash advances are charged at a fixed rate of pennies per pound borrowed. This is called the factor rate and is mostly displayed as a decimal figure, such as 1.2 or 1.4.

To work out how much you will need to repay overall, the lender will multiply the amount you are borrowing by the factor rate. So if you took out a merchant cash advance of £10,000 at a factor rate of 1.4, you would pay £4,000 in fees on top of the sum borrowed, making a total of £14,000.

The factor rate will be determined by your lender, based on your business sector, and your business’s health and performance.

To be eligible for a merchant cash advance loan, your business will need to meet the lender’s criteria. This will likely include, but is not limited to:

  • Being based in the UK or Ireland
  • Having a merchant account (i.e. accepting debit and credit card payments)
  • Being a limited company, partnership or sole trader
  • Trading for a minimum period (this can vary from lender to lender)
  • Processing a minimum amount in card sales per month (this can vary from lender to lender)
Since a merchant cash advance is based on monthly card sales, it is possible to get one if you have a bad credit history. However, your credit score may affect your factor rate if the lender perceives you as a higher-risk customer.

As a start up, you may struggle to meet the minimum monthly card sales and trading period requirements, though this is not impossible. You may, therefore, need to consider other forms of finance for start ups.
To be eligible for a merchant cash advance loan, your business will need to meet the lender’s criteria. This will likely include, but is not limited to:

  • Being based in the UK or Ireland
  • Having a merchant account (i.e. accepting debit and credit card payments)
  • Being a limited company, partnership or sole trader
  • Trading for a minimum period (this can vary from lender to lender)
  • Processing a minimum amount in card sales per month (this can vary from lender to lender)
Since a merchant cash advance is based on monthly card sales, it is possible to get one if you have a bad credit history. However, your credit score may affect your factor rate if the lender perceives you as a higher-risk customer.

As a start up, you may struggle to meet the minimum monthly card sales and trading period requirements, though this is not impossible. You may, therefore, need to consider other forms of finance for start ups.

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