Merchant cash advance for UK businesses

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.

• 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.

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

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.