As a business owner in the UK, you want to get your hands on quick and easy capital to help grow your business. A merchant cash advance (MCA) can be an attractive solution for accessing much-needed funds, when traditional banking solutions are not available.
Read on for everything you need to know.
Featured pro tools
Best merchant cash advance providers
| Lender | Minimum loan | Maximum loan |
|---|---|---|
365 Business Finance | £5,000 | £200,000 |
Capify | £5,000 | £500,000 |
iwoca | £1,000 | £50,000 |
Liberis | Ask | Ask |
Merchant Money | £5,000 | £500,000 |
Nucleus Commercial Finance | £3,000 | £2,000,000 |
Previse | £25,000 | £2,000,000 |
YouLend | £500 | £1,000,000 |
What is a merchant cash advance?
A merchant cash advance is a type of loan that allows businesses to access quick funding. Unlike traditional business loans, it does not require collateral and typically involves the lender buying a portion of the business’s future sales at a discount in exchange for an immediate lump sum payment. Businesses then repay the loan by paying back a percentage of their daily sales until the loan is paid off.
This makes it an attractive option for businesses that need access to capital quickly and don’t have the credit score or collateral necessary to qualify for a traditional bank loan or credit card. This type of borrowing can also be useful if you are expecting a large influx of money soon, such as from an upcoming contract or sale.
Choosing a merchant cash advance provider in the UK
When choosing a merchant cash advance (MCA) provider, businesses should compare key factors to ensure they get a fair and suitable deal.
Start by evaluating the factor rate, which determines the total repayment amount – lower rates mean lower costs.
Check the repayment structure, as some providers offer fixed daily or weekly payments, while others take a percentage of card sales, which can be more flexible during slow periods.
Look for transparent fees to avoid hidden charges or early repayment penalties. The application process and funding speed are also important, as some providers offer same-day approvals while others take longer.
Additionally, consider the provider’s customer reviews and reputation, ensuring they have a track record of supporting businesses fairly.
Finally, check if the provider offers repayment flexibility in case of seasonal fluctuations, and confirm that their terms align with your business’s cash flow needs.
FAQ
A merchant cash advance is a type of business funding where a lender provides an upfront sum of cash, which is repaid through a percentage of future card sales. It is commonly used by businesses with regular card transactions, such as retail, hospitality, and e-commerce businesses.
The lender will assess the financials of your business and agree on a repayment percentage based off your current sales. This percentage can range anywhere from 8-100% of your total daily sales and is generally determined by the amount you are able to pay back each day.
Once approved, the lender will advance you a lump sum payment that can range from £2,500 to £250,000. From there, the lender will automatically draw a percentage of your daily credit or debit card sales until the loan is paid off. This makes it easier and more convenient for you to make repayments without worrying about missed payments.
The terms of each merchant cash advance can vary, so it’s important to research lenders and determine which one best fits your business needs. With the right lender, a this type of borrowing can be a great way to get quick capital for your small business.
If you’re looking to refinance your merchant cash advance, there are a few options available.
You can apply for a traditional loan from a bank or lender, but this may require collateral and typically has more stringent credit requirements than other financing options.
Fortunately, alternative finance providers have emerged as an option for small businesses to refinance their merchant advances. These lenders generally offer more flexible terms and don’t require collateral, making them a good option if you are looking for quick access to capital.
When refinancing your merchant advance, be sure to shop around and compare loan offers from multiple lenders. This will help you find the best terms and ensure that you get the most out of your refinancing.
Defaulting on a merchant cash advance can have serious consequences for your business.
The first step the lender will take is to attempt to collect payment through collection agencies and legal action, if necessary. This can lead to negative marks on your credit report, making it more difficult to obtain traditional loans in the future.
Additionally, the lender may use aggressive collection tactics, including late fees and other charges. These can add up quickly, making it even harder to pay off the loan. Look for lenders that are regulated by the FCA where possible.
Finally, if all else fails, the lender may take legal action against your business by seizing any assets you have pledged as collateral. This could include property or equipment used in your business.
For these reasons, it’s important to pay off your merchant cash advance on time and as agreed. If you are having trouble making repayments, contact the lender immediately to discuss your options. This can help you avoid defaulting and save your business from potential financial hardship.
Consider factors such as:
Factor rate – The total repayment cost.
Repayment terms – Fixed daily/weekly payments vs. percentage of card sales.
Funding speed – Some providers approve and deposit funds within 24 hours.
Fees and transparency – Look for clear terms with no hidden charges.
Customer reviews – Check feedback from other businesses.
Flexibility – Ensure the provider allows adjustments for seasonal sales fluctuations.
The factor rate is a multiplier (e.g., 1.2 or 1.5) applied to the advance amount to determine the total repayment. Unlike traditional loans with interest rates, MCA repayments are fixed upfront.
Repayments are automatically deducted as a percentage of your daily or weekly card sales, meaning payments fluctuate based on business revenue. Some providers also offer fixed repayment plans.
Origination fees – A setup fee for processing the advance.
Early repayment charges – Some providers charge penalties for early full repayment.
Administrative fees – Additional processing or servicing costs.
Late payment fees – If your sales drop below expected levels, some providers may impose charges.
Some providers offer same-day or next-day funding, while others may take a few days for approval and transfer.
Most MCAs are structured so repayments are a percentage of revenue, meaning they decrease when sales are lower. However, check if the provider has minimum repayment requirements or penalties for slow repayments.
The amount is usually based on your average monthly card sales, typically ranging from £2,500 to £500,000, depending on the provider and your turnover.
Business loans – Fixed repayments over a set term.
Overdrafts – Flexible credit facilities linked to your business account.
Invoice finance – Advances against unpaid invoices.
Line of credit – A revolving credit facility where you withdraw funds as needed.
Yes, since MCA providers focus more on card sales history than credit scores, businesses with poor credit may still qualify. However, factor rates may be higher.
Some providers allow “stacking” (taking multiple MCAs), but this can be risky as repayments may become unmanageable. Always assess affordability before applying.
Some providers require you to use their partnered payment processor, while others integrate with existing systems. Always check this before committing.
If you’re struggling to make repayments on your advance, there are a few options available.
The first is to refinance the loan by taking out another loan with more favorable terms. This can be done through traditional lenders or alternative finance providers who specialise in helping businesses refinance their current loans.
You can also negotiate with your current lender to adjust the repayment percentage or extend the loan term. This can be a good option if you are able to make smaller payment amounts over a longer period of time.
Finally, it’s important to remember that merchant cash advances are not meant to be long-term solutions and should only be used as a last resort. If you’re having difficulty making payments, contact your lender as soon as possible to discuss your options and explore other financing solutions.