Does your business take card or online payments?
Are you looking to boost your business cashflow?
What is a Merchant Cash Advance?
A merchant cash advance (MCA) is a fast and flexible way to receive funding, and repay through a percentage of your monthly card sales.
No fixed payments, terms or security required.
When it comes to a standard business loan, your business has to make scheduled, set payments - whether it can afford to or not. However, with a merchant cash advance, repayment terms are stress-free.
How do Merchant Cash Advances work?
The merchant cash advance is provided to you by the lender, and you pay this (plus the factoring rate) back overtime. The lender receives repayments by deducting a percentage of your card terminal sales until the loan is fully paid off. This means that your business only pays back what it can afford each month.
It is important to note that, unlike standard business loans, merchant cash advances have no fixed monthly repayments or interest rates.
Is an MCA right for my business?
- If your business receives payments through a card machine then you can access a merchant cash advance
- You need a minimum of 3 months card transaction history to be eligible
- If you can't wait long to access funding then an MCA is a way to get funding faster
- Repayments are taken automatically, meaning you don't have to do anything
- The repayment amounts are flexible and can vary each month depending on how busy your business is
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FAQs
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With The Directors Choice, you are in charge. With our selection of lenders, can find the best merchant cash advance offer for your business.
Rest assured that the lenders we work with are trusted and experienced in finding business owners like you the funding your business needs to grow - fast!
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Merchant cash advances are a loan with are repaid to the lender over a flexible amount of time.
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MCA's are a good choice for your business if you use card terminals (and have been for at least 3 month) and need fast access to funding. Merchant cash advances are good if you need help with your cashflow or to pay for a business expense.
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The amount of funding your business can borrow from a merchant cash advance depends on your average monthly card takings. The more income you receive through your card machines, the more funding you will be eligible for.
The lender will assess your card transaction history to determine the level of funding you're eligible for.
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UK businesses that takes card terminal sales or online sales from your customers.
Your business is a limited company, partnership or sole trader.
Typically, hospitality, retail, online shops & ecommerce stores, restaurants, hotels, cafes, hairdressers, beauticians and garages use merchant cash advances as they tend to take card payments from customers. However, any business with a card terminal can apply.
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You can use a merchant cash advance for anything that benefits your business. A few common examples include:
- Purchasing inventory
- Purchasing equipment
- Marketing
- Cash flow relief
- Unexpected costs
- Premises refit or expansion
- Paying VAT or bills
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You can apply for a merchant cash advance through The Directors Choice to get the best offer from our trusted lenders. Simply enquire now.
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Your factor rate will determine your total repayment value. If your business becomes stronger or repays the loan faster, your total repayment value will not decrease.
As merchant cash advances only take card terminal sales into account, any sales made in cash, cheque, or bank transfers do not count towards the amount of funding you're eligible for, or contribute to your repayments.
Some lenders will offer a loan which is a little higher than your monthly card turnover, however if you need a loan which is significantly larger than your card turnover, a merchant cash advance may not be the best option for your business.
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There are no interest rates on a merchant cash advance, so the lender will use a factor rate to calculate the total amount you repay.
A factor rate is calculated depending on your business performance, trading sector, and any other risks. The factor rate will then be multiplied by the amount of funding you need to determine the total repayment value.
For example:
You need £3,000 and have a factor rate of 1.25
£3,000 x 1.25 = £3,750
£3,750 is the total amount you would repay to the lender.
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No. A lender will want to make sure you can repay the loan through a credit check - protecting your business and the lender.
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Yes, it can be possible for you to get a merchant cash advance with poor credit because MCAs are given based on card sales and business performance.
However, your credit rating may influence the level of risk involved. The higher the risk, the lower the loan size and higher the repayment amount (factor rate).
Merchant cash advances can be ideal for businesses that have been rejected for other forms of funding. If your credit rating is especially poor, a lender may still declined you. It is worth finding out if your business could be eligible, though.
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No, using The Directors Choice to enquire about a merchant cash advance will NOT affect your credit rating.
The application process with a lender shouldn't affect your credit rating.
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Yes, however some lenders will accept bank statements and others may require open banking (if no open banking is done, they require at least 6 months of your card transaction statements).
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Yes, there are no penalties for early repayment. Although, there are no savings to your business as the total repayment value remains the same as merchant cash advances don't have interest rates.
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With a merchant cash advance, you repay a fixed percentage of your card sales. If your business is having a slow month, you will repay less. If your business is having a busy month, you repay more. The total repayment value you repay never changes.
With business loans, monthly repayments are fixed. Therefore, if you're having a slow month, you still need to make the same monthly repayment.
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There are no interest rates on a merchant cash advance because the lender will use a factor rate instead. The factor rate determines the total repayment value.
A factor rate means that the total repayment value doesn't increase if you take longer to repay the merchant cash advance - unlike with interest rates.
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Yes. As long as you receive payments from your customers through card terminals, and have at least 3 months of card transactions.
Limited companies, sole traders and partnerships can all apply.
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A merchant cash advance is no different to any loan. When a business defaults on a merchant cash advance, the lender may use other routes to get their money back.
The lender will try to ensure they're only offering a business what they can afford to repay. Be sure you're confident you can before accepting an offer from a lender.
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Often, yes. Lenders will try to work with your existing provider. There are however some lenders that restrict the card machine you can use for a merchant cash advance.