Merchant Cash Advance

What is a Merchant Cash Advance?

This type of loan is ideal for small businesses that operate seasonally, as loan repayments are minimal on months with a low turnover and more substantial on months with a higher turnover. Essentially, the more transactions and credit card sales you make, the more you repay.

A PDQ cash advance is an unsecured advance of cash, based upon future credit and debit card sales. A pre-agreed percentage of your businesses’ card transactions are taken to repay the loan, until the confirmed total payback has been met. As payback is directly linked to card takings, you’ll only pay back your advance when your business earns.

For example, if the pre-agreed percentage with the lender was 10%, this means that each card transaction would incur a small 10% charge to repay the facility. Using a real life example; If a customer spent £10 on a card, the lender would take £1 of this transaction and you would keep the remaining £9. This split would remain in place until the pre-agreed payback figure has been met. Compared to a traditional loan, this type of business finance can be more affordable and manageable.

Merchant advance loans don’t just have to be used for emergency situations. Due to the loan being unrestricted, you can use the funding to go towards any business expense. Most of our customers will use merchant cash advance funding for one of the following:

• Growth
• Refurbishments
• Equipment purchase
• Additional staff
• Marketing

We can also offer secured business loans and unsecured business loans to help you grow your business.

We work with all card acquirers and online payment processors

Key features

• Suitability: Businesses taking at least £5k per month through an online payment processor or card terminal..
  
• Purpose: Can be used for any business expense.
  
• Amount: Loans ranging from £2.5k – £2m, dependant on the lender. You will typically be able to borrow up to 2x your monthly card takings.
  
• Term: This will vary, as you will only repay a fixed percentage of future card takings – no cash will be used towards repayment.
  
• Cost: No interest or APR. Just a single, fixed, pre-agreed fee.
  
• Security: Personal guarantees may be required form owners/directors of the business. Some lenders do not require this.
  
• Speed: Applications can be processed within 24 hours from receiving a full proposal. Drawdown times will depend on your card acquirer.
  

Key benefits of a merchant cash advance

Repayments at the source

You won’t have to worry about knowing which date your payment will be taken, or whether you have enough in the bank – repayment is ‘taken at source’. This means the funds will not reach your account before being taken out again. The lender works with the card acquirer directly, and the payments are taken automatically until the entire debt is paid.

Repay as you earn

The more you earn, the more you pay back. A particularly busy period for your business would mean more of the loan being paid back, however during a quiet period, the lender would require less. You therefore won’t have to worry so much about whether you have enough funds to cover the repayments, as they are always made as a percentage of your daily business revenue.

Access other finance options

While it may be difficult to secure more than one regular business loan, having a Merchant Cash Advance doesn’t hinder your ability to have another type of finance at the same time. You can use your PDQ Cash Advance for general cash flow while having a different type of business loan for other vital business needs.

Am I eligible for a Merchant Cash Advance?

Generally speaking, most limited and non-limited companies, including partnerships, are eligible for a UK merchant cash advance small business loan. The main requirement is that they have been taking card payments for at least 4 months through a PDQ terminal or an online e-commerce store.

To qualify for a cash advance, you do not have to be a homeowner and will not have to secure anything against a property. There are no specific sectors that are exempt from this type of loan. Providing you take regular card payments and fulfill the monthly threshold of £5k, you should qualify.

If you don’t qualify for a merchant cash advance…

Businesses will not always be accepted for a merchant cash advance loan at first. There could be a number of reasons for this, but even if you’re initially rejected, there is still hope.

It could be that your card takings are lower than what is required in that particular month, or that your business hasn’t been trading long enough. In either instance, there is still a chance that you can get yourself a merchant cash advance in the very near future.

• If you are below the financial threshold of £5k, an option may simply be to increase your card takings. You can do this by firstly ensuring your PDQ machine is on show so your customers know they can pay by card, and also drawing as much attention to your card machine as possible to get customers using it frequently.
• If you are a newer company and haven’t made the 4 month threshold, simply waiting for those 4 months to be over before applying again is the best route to take.
• Look into marketing your business further to increase your debit card takings

If you are unable to increase PDQ payments and are in desperate need of a business cash advance, we have other options available. Maybe you need to get more inventory? Or you’re in need of a new boiler? There are other ways you can get funding for these mishaps. Speak to us today to learn more about different types of small business loans and cash advances you might be eligible for if merchant cash advance direct lenders are unable to provide the capital you need.

How merchant cash advances work

As mentioned, merchant cash advances are loans which are repaid through a business’s transactions via a PDQ machine.

Below is an example of a PDQ Cash Advance:

• A retail store is looking to purchase some more stock to meet the growing demand of their customers.
• The store has been averaging around £30k per month in card sales over the last 12 months. Typically lenders can offer up to 150% of a company’s monthly average card sales. This means this particular business can borrow up to £45,000.
• The lender agrees to lend £45,000 with a 15% repayment split, this means that each future transaction will incur a 15% charge to repay the facility.
• The customer receives the funds and continues to repay the facility until the pre agreed fixed total payback figure has been met. The total payback figure is fixed and will not change throughout the term.
• Once 50% of the facility has been repaid, you could be eligible to request a top up and continue to use the facility as an ongoing credit line.

Merchant cash advance repayments

The repayments will be taken automatically at source from your merchant account; therefore you will not need to make any manual repayments. Some lenders provide you with a repayment dashboard that will allow you to track your repayments.

Unlike bank loans, there is no fixed term on this product, as the loan is directly related to how many card terminal sales are made each month. However, all loans are typically paid back within 12 months. Loans can be arranged same-day if everything is sent back quickly, but on average this takes around 5 working days depending on lenders, your credit score, and your predicted future credit card sales.