Merchant Cash Advance
Finance based on your card machine turnover
Fill out this form to enquire about a Merchant Cash Advance
The Merchant Cash Advance
A Merchant Cash Advance allows you to raise finance based on your credit card turnover. Your proven average monthly turnover is typically the amount you can receive a merchant advance loan for.
The Merchant Cash Advance was imported from America in about 2007/8 but only really gained popularity in the UK about 4-5 years ago.
Whatever you can show is your average monthly turnover is typically what you can get, and you repay this amount plus a fee by agreeing to give a small percentage (usually 10-15%) of all card receipts to the advance provider until the finance is paid off. This is done automatically at the terminal with each transaction and you don't have to change your card processor.
How a Merchant Cash Advance works
- Get up to your monthly average turnover as a business cash advance
- Repay by giving a percentage of card sales towards repayment. No deadlines.
- Very flexible with adverse credit histories but minimum trading time is 9 months
- No need to change your card processor
Frequently Asked Questions
Is a Merchant Cash Advance secured on anything?
No. It’s completely unsecured and based solely on your historical card turnover.
How much can I get?
The amount available is usually equivalent to your average monthly turnover from the last 9-12 months (plus maybe 10-15% if your business is established). The minimum amount is £3,000 and the maximum is £500,000.
If I have adverse credit, can I still get a Cash Advance?
A Merchant Loan is very forgiving of most adverse credit histories. In the past, we have managed to secure merchant cash advances deals for businesses with CCJs and defaults, businesses run by those in IVAs and even run by ex-bankrupts.
What does it cost?
A fixed fee is added to your cash advance and this is usually 20-35% to give you the total amount you need to repay. There is no other set-up, admin, documentation or broker fee - that’s it. For example, if you take a £10,000 advance, you would probably have to pay back £12,500 (assuming a 25% charge).
How are repayments made?
You agree to give a small percentage of your PDQ card takings towards repaying the advance. This is usually 10-20%. Your system is set up and repayments are automatically deducted from each transaction, so you don’t have to make a weekly/monthly payments. For example, if the deduction percentage was 15% and someone spent £100 in your business, you would get £85 and £15 would go towards reducing the balance you have to repay. When the advance and fee is paid off, you go back to keeping 100% of all takings.
Do I have to change the company that processes my card payments?
No, you can stay with your current provider.
Does the deduction process mean it takes longer for me to receive the money I take on my card machine?
No, it shouldn’t. Your takings should still appear in your bank account 3 days after the payment was received. The only exception here is if you currently get your money on a next-day basis (HSBC and some other banks can facilitate this).
What if I need more finance later?
Business Cash Advance deals can be ‘topped-up’ once you have paid back about half or two-thirds of the advance you’ve taken. It remains a facility you can dip into in the future if you need more funds.
Can I get a Merchant Cash Loan if I don't take card payments?
We can look instead at a Revenue Advance (based on sales) or a Short Term Unsecured Business Loan. Call us on 01494 410 125 to discuss.
Are there other business finance options available to me?
Yes, we have a wide range of business finance options. Please call us on 01494 410 125 if you’d like to know more.
How does your business qualify?
You must make the majority of your revenue through card terminals and you must have been taking card payments for at least 6 months. Your credit history is not very relevant. Unfortunately, we don’t deal with start-ups as we do need to see at least 6 months’ card payment history.
How much time do I have to repay?
There are no deadlines. It takes as long as is required, though typically we see most advances paid off within 6-9 months.
How long does it take to arrange?
This depends on who you process your card payments with at the moment. Some processors allow the advance to be paid to you within 3-4 days but in most cases, it takes about 2 weeks.
Does it matter if my business is a sole trader?
This is not a problem. A merchant cash advance is available to your business if it’s registered as a sole trader, partnerships or a limited company.
What security is required?
None, though you may be asked to give a Personal Guarantee. This is an unsecured form of finance. This means you don’t need to be a homeowner, you don’t need to put any assets on the line and you won’t be asked to supply a guarantor.
What can I use the Cash Advance for?
There are no restrictions on what you can use the advance for as long as it is legal and for your business. This means you can take a merchant cash advance to buy stock, do refurbishments, pay a bill, catch up on VAT payments, invest in marketing or whatever you need it for.
Is this a loan?
No. Technically speaking it is not a loan. What you are doing is selling an amount of your future card takings for a fixed price today. These future takings are ‘sold’ incrementally transaction by transaction via the deduction percentage you agree to while you get a cash payment today for them.
Merchant Cash Advance Requirements
Applying for a Business Cash Advance is very easy. Below are listed the things you need in order to apply.
- Eligibility Criteria Minimum six months' trading history with your card machine & a minimum six month lease on the premises you are in.
- Documents Required Last six (or
preferably 12) months' merchant statements, proof of ID, proof of bank account
and a completed application form.
- Additional Comments The speed at which you receive your funds depends on your card network. Some networks take 5-7 days and others taking 10-14 days
In our
experience, there are two types of businesses which are especially well-suited
to merchant cash advance loans:
1. Seasonal businesses and companies who don't want no monthly minimum payments. This is because repayments are linked to your card sales. When business is good, you pay off more. During quieter periods, you pay less until the full loan amount is repaid.
2. Business with adverse credit histories for whom a business loan is not an option. When you choose a merchant cash advance bad credit isn't usually an issue. That's because repayments are taken from your top line. This means that advance providers are often more comfortable with poor credit histories.
Cash advances against merchant sales are a great fit for many businesses, but not for everyone. Problems can arise when businesses are mis-sold merchant cash advances when other finance options such as straightforward loans are a better option. To ensure you find the right fit for you, please call our experienced business finance specialists today
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