Merchant cash advance for UK businesses

The best merchant cash advance provider is the one whose factor rate, repayment percentage and terms fit your card takings, not the one with the loudest advert. Smart Funding Solutions, a whole-of-market commercial finance broker, compares MCA providers on our panel and sets each offer's total repayable side by side, alongside loans that may cost less.

MCA providers on our panel

From our lender records, providers we approach for card-based advances include 365 Finance, Bizcap, Capify, Elect Capital, Funding Alternative Group, Momenta Finance and SAPI, listed alphabetically. Each sets its own criteria, and which one suits depends on your card turnover and sector.

How to compare MCA offers

• Total repayable: the advance multiplied by the factor rate. Paying back faster does not usually reduce it.
• Repayment percentage: the share of each day's card takings taken, and what happens in a quiet month.
• Card terminal: whether you can keep your current provider.
• Top-ups and renewals: a second advance before the first is cleared adds cost.
• Regulation: most MCAs are a purchase of future card sales, not a loan, so consumer credit rules do not apply.

Run the numbers with our merchant cash advance calculator, and read the British Business Bank's guide to merchant cash advances. Compare it with revenue-based loans and short-term loans, see the pros and cons of an MCA, or refinance an existing advance. MCAs are common in restaurants, takeaways, salons and retail. Instant Quotes shows which MCA providers on our panel may suit.

An MCA is usually priced with a factor rate rather than an interest rate. The factor rate is multiplied by the amount advanced to give the fixed total you repay. Because that total is agreed upfront, the cost does not change whether you repay faster or slower.

That makes comparisons with loans tricky. If card sales are strong and you repay quickly, the effective annual cost can be high. Always compare the total amount repayable, not just the advance, and ask whether there are any fees beyond the factor rate. Our guide to merchant cash advance pros and cons works through how the numbers play out.

For how one revenue-based provider prices its funding, our guide to YouLend loans works through what a £20,000 advance costs at different factor rates.

• most of your income arrives by card, and takings are reasonably consistent
• trade is seasonal, so a fixed monthly repayment would be hard in quiet months
• you need working capital for stock, a refit or a short-term gap
• you have no property to offer as security, or your credit record would limit loan options

It is less likely to suit businesses with thin margins, mostly invoice or cash income, or a profile that qualifies for a cheaper fixed-term loan.

Cafes are a common example of card-heavy, seasonal trade; our guide to business loans for coffee shops compares a merchant cash advance with the other options for each stage of a cafe.

Salons that take most payments by card can compare this with the other options on our beauty salon finance page.

Our street food kitchen case study shows merchant cash advances used in stages as a business expanded.

UK businesses that take regular, consistent card payments usually qualify for a merchant cash advance, even where their credit history is imperfect. Providers typically look for:

• a UK-based sole trader, partnership or limited company
• regular debit and credit card takings, with some months of card-processing history
• card turnover at a level the provider considers sufficient; minimums vary by provider
• bank statements showing steady trading and how existing commitments are handled
• business and director credit history, although card turnover usually matters more

A merchant cash advance is often one of the quicker forms of business funding, typically taking from a few days to around two weeks from application to money in the account. Providers mainly need recent card-processing statements and business bank statements, and many can read these through open banking or directly from your card terminal provider. Time is added where the provider needs you to switch card terminal or set up a split-settlement arrangement so it can collect its share of each sale, where an existing advance must be settled or consolidated first, or where a personal guarantee and identity checks are still outstanding. Exact timescales depend on the provider and on how quickly documents are supplied.

MCAs are generally unsecured: the provider relies on your future card takings rather than property or equipment. Many providers still ask directors for a personal guarantee, so read that part of the agreement carefully.

• the total amount repayable and any fees beyond the factor rate
• the percentage of card sales taken and how it is collected
• what happens if sales drop sharply or you change card terminal provider
• whether a personal guarantee is required
• terms for early settlement and for topping up the advance

Not always. An MCA's cost is fixed by the factor rate, often with no separate arrangement fee, while some business loans add an arrangement fee of up to around 10% to a higher rate. Compare the total repayable against the cash you actually receive: on those terms an MCA can cost less, but a business that qualifies for a low-rate loan with no fee will usually pay less with the loan. Our guide Is an MCA right for my business? shows the arithmetic for a £50,000 advance against a 12-month loan.

If you want lower costs or fixed repayments, an unsecured business loan may suit you better. Other options include a revolving credit facility, asset finance for equipment, or invoice finance if you sell to other businesses on credit terms. Compare them all on our cash flow finance page.

If you already have more than one advance or short-term loan running, a business debt consolidation loan can replace them with a single monthly repayment, provided the total cost still makes sense.