What is merchant cash advance?

Merchant Cash Advance

Merchant cash advance is an innovative solution which offers an advance of money secured against future card payment receipts. It is therefore ideal for businesses that take a significant proportion of their income through card transactions, so the hospitality and retail sectors for example. This type of funding solution can be particularly useful for businesses looking to fund growth, but it can also be used to meet certain working capital requirements.

Repayments are based on a percentage of future card transactions receipts and are deducted “at source” by the lender working directly with your card terminal provider. How much you can borrow will depend on a number of factors including your typical turnover and how much the lender believes you can realistically afford to repay out of your future card payment receipts.

Applying for a merchant cash advance is generally quicker and easier than for other forms of business loan. Generally the lender will not require credit checks or detailed accounts, however they will want to see your card transaction history in order to assess how much can be advanced.

Pros

You get flexible and scalable finance where what you can borrow, and the rate at which you repay is in proportion with your sales, which should make it more affordable.

The application process can be very quick, with funds received within 48 hours.

Repayments are made easy as they happen automatically between the card terminal provider and the lender.

As a general rule it is possible to get a merchant cash advance alongside other forms of finance, giving you greater access to funding overall.

Cons

The amount you can borrow is limited to the amount you receive in card payments. So if a large proportion of your income comes from bank transfers then you may be better off looking at alternative solutions.

Some lenders only work with specific card terminal providers so the choices you have could be limited if you are not with one of the mainstream providers.

Good for - Recently started or established businesses, with a high proportion of income from card payments and expecting to grow rapidly