Merchant Cash Advance

A merchant cash advance is a type of financing option for small businesses in the UK. It is an alternative to traditional bank loans and is often used by businesses that may not qualify for a traditional loan.

 

A merchant cash advance is typically provided by a third-party lender, such as a financial institution or alternative lender. To obtain a merchant cash advance, a business must provide some form of collateral, such as a percentage of their future credit card sales.

 

The lender will then advance the business a certain amount of money, based on the collateral provided. 

The business must then pay back the advance, plus a fee, over time by allowing the lender to take a percentage of their daily credit card sales.

 

The repayment amount is typically based on a set percentage of the business's daily credit card sales and can vary depending on the lender and the terms of the advance. Merchant cash advances are typically used for short-term financing needs, such as purchasing inventory or equipment or covering unexpected expenses.

 

They are generally not suitable for long-term financing needs, as the repayment terms can be more expensive than traditional loans. Interest rates on merchant cash advances can vary widely, and it is important for businesses to carefully compare rates and terms before entering into an agreement.

 

Merchant cash advances are one of the most innovative products in alternative business finance. The concept has only existed for a few years, but it’s already proving very popular with retail businesses and the leisure sector.

 

Put simply, a merchant cash advance uses your card terminal to 'secure' lending — perfect for businesses without many assets, but who have a good volume of card transactions every month. Repayments are then taken as a proportion of your revenue, making it a quick and easy funding solution for many SMEs.