Product focus: Merchant cash advance

Johnson Reed
3m read
Merchant cash advance

Does your business receive payment via card terminal? Well this new loan type may just be of interest to you…

MERCHANT CASH ADVANCEA Merchant cash advance (MCA) allows businesses to access immediate cash by utilising their future income through an unsecured loan. The lender provides the company with a large sum in return for a fixed percentage of all card terminal payments received by the company whether it is on a daily, weekly or monthly basis.

You tend to find that an MCA is easier to obtain than a more traditional business loan, as you don’t need lots of assets nor does it require homeownership or a deep credit history search. Businesses that will find the most use out of this loan are those who take high volumes of card payments, with sole traders, partnerships and limited companies all welcome to utilise the loan.


How does it work?

The lender works directly with the card terminal provider, so they can access data showing the volume of card terminal payments you make. The lender uses this information to calculate the sum they will lend and a plan to pay back the loan. Thismerchant cash advance makes it ideal for companies who see seasonal fluctuations in income as the percentage doesn’t change, but the amount of payments will, so you pay more in your busier months and pay less in your quieter ones. It must be added that there is a “sunset” point with all MCA’s, with a final repayment of the loan being required on this date. This can either be a long term point (3 years) or a short term point (3 months).

Another bonus is that you don’t have to send remittances at any point as the money is taken from the source, making this option stress-free and leaving you with nothing to worry about!



What is the factor rate?

The cost of the MCA is based on factors such as volume of card receipts, industry sector, business credit rating, and your turnover. The cost is called the factor rate and it is set at a fixed rate per £1 borrowed. Typical factor rates vary from 7p to 35p per £1 you borrow. The factor rate is set at the start of loan and is fixed, therefore it will not change throughout the term or if the loan is paid back early.

The factor rate is the fee charged by the merchant cash advance provider. Unlike an interest charge, that may be variable, the factor rate is set at a fixed pennies per pound borrowed. Borrow £1 at a factor rate of 1.25 and you will repay £1.25. Usual factor rates are 7p to 35p per pound borrowed.


merchant cash advance


To conclude…

This loan has been brought onto the market to support those that may not meet the requirements to be accepted for a business loan, with the good news being that if you have been rejected for a loan previously, it does not impact your chances of acceptance for an MCA. What’s more, it caters to businesses who may experience seasonal fluctuations in income, meaning they don’t have to worry about missing a repayment deadline due to a quieter month.

If you have any further questions or would like to start the process of securing your merchant cash advance, call us today on 0161 429 6949.