What is a Merchant Cash Advance?

Business owners looking for finance will often consider as many options as possible. Different sources of business finance have different terms and conditions, repayment plans, and interest rates, so it’s smart to shop around and get to know the market.

The Merchant Cash Advance might be a bit unfamiliar to you. It’s quite different to a conventional business loan, but the premise is really simple. If you’re new to the Merchant Cash Advance, here’s the ultimate guide to how much cash you can raise, when you’ll pay it back, and how it could work for your small business.

Merchant Cash Advance explained

Businesses have relied on bank loans, and other bank-based finance options, for as long as banks have been around. In fact, a bank loan or business credit card is often the first option that comes to mind when seeking finance.

Where can you get a Merchant Cash Advance?

Merchant Cash Advances aren’t as common as conventional business loans, but some providers specialise in it.

Those providers are a good place to go for information, but make sure you read up on a few of them to find the best deal. The terms and conditions can vary massively, so always check the details.

Why are Merchant Cash Advances important?

Access to business finance helps small businesses grow significantly. Small businesses make up 99.3% of all private sector businesses in the UK, so their success has a huge impact on the country’s economy as a whole.

With essential funding, small businesses can attract more customers, improve productivity, hire more people, and finesse their products and services. The Merchant Cash Advance is a flexible, affordable way to make this happen.

What your small business could do with a Merchant Cash Advance

A Merchant Cash Advance is a great way to boost cash flow in your small business. You can use your lump sum to pay for essential upgrades and improvements. Here’s some inspiration!

Renovate and refurbish

Jazz up your interior or exterior. A Merchant Cash Advance can help pay for a building extension, redecoration, and more.

Equipment and stock

Invest in the best for your business. Top of the range equipment can help you become more efficient and impress even more customers during your operating hours.

Staffing costs

Hire new team members for busy periods, or invest in skills training. A happy, knowledgeable team will serve your business well.

Technology and automation

Spend less time on the day-to-day admin and more time growing your business.

How do you qualify for a Capify Merchant Cash Advance?

Meeting eligibility requirements is usually easier with alternative finance providers. Banks are often quite strict and demand a better credit rating, which is out of reach for some small businesses, particularly those in their first couple of years.

Here’s how to qualify for a Capify Merchant Cash Advance:

Run a UK-based business either as a sole trader, in partnership, or as a limited company
Take at least £3,500 each month in card payments
Have at least 6 months trading records

Merchant Cash Advances under the spotlight

According to the British MCA Association (BMCAA), lenders will generally advance £2,500 to £300,000, depending on your turnover. It’s unsecured too, so you don’t have to put any of your assets down as collateral.

You’ll agree the repayment percentage with the lender in advance. The BMCAA says you should expect to pay between 10%-18% of each sale as repayments.

The essential Merchant Cash Advance glossary

Borrower

You! The person or small business borrowing or raising finance.

Merchant

Another term for ‘borrower’. Specifically, a borrower accepting card terminal payments.

Lender

That’s us – the Merchant Cash Advance provider.

Principal

The amount of cash you raise.

Factor rate

This is an easy way to work out the full amount you’ll repay after interest is added. If you borrow

£10,000 and the factor rate is 1.32%, you’ll pay back £13,200 in total.

Payments

The percentage taken from your card transactions which goes towards repayments.

Term

The amount of time it will take to pay your finance back.

Collateral

A physical item you include as part of your loan agreement. That means the lender can take it from you if you can’t repay the finance.

Card terminal

The card machine your customers use to pay for your products and services.

Stuck on some more technical business finance terms? Decode them with our jargon buster.

What is a Merchant Cash Advance?

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