Compare Merchant Cash Advances To Help Your Business
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What is a Merchant Cash Advance?
A Merchant Cash Advance, also known as a PDQ Cash Advance or Business Cash Advance, is a quick and easy alternative to a bank loan which secures lending using your business’ card terminal. Repayments are taken from the transactions processed through a PDQ machine (card machine).
This type of loan is ideal for businesses that operate seasonally, as loan repayments are minimal on months with a low turnover and more substantial on months with a higher turnover.
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.
A PDQ Cash Advance doesn’t 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 a Merchant Cash Advance for one of the following:
- Equipment purchase
- Additional staff
We work with all card acquirers and online payment processors
- 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.
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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. 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 card takings
If you are unable to increase PDQ payments and are in desperate need for a loan, 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.
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.
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 your acquirer.
Merchant cash advance: FAQs
How much can I borrow?
You can borrow up to a maximum of £2m. Normally, we can lend up to 2x average monthly card takings. For example, if you are taking on average £50k per month in card sales, we would be able to lend up to £100k.
How much does a merchant cash advance cost?
Rather than charging an interest rate, lenders will charge a single fixed fee, also known as a factor rate. This can range from 1.10 – 1.30. Therefore, a typical advance of £10,000 will cost between £1,000 – £3,000. This is a fixed cost, so you will know exactly how much you will be paying across the facility.
Are there disadvantages to a merchant cash advance?
Yes – while this type of loan might seem like a win-win situation on paper, it is not the most suitable finance option for everyone. If your business deals mostly with cash, invoices or bank transfers, it’s likely that you wouldn’t benefit as much from a PDQ Cash Advance. This is because the repayments are made through card transactions, so it’s most beneficial if this is your business’s most used form of payment.
There is also a limit to the amount you can borrow based on your monthly turnover. You’ll usually be able to borrow the equivalent of your average monthly revenue, but it would be difficult to obtain this kind of loan for a larger sum. This is because it must be paid back via card payments, so if your company isn’t making enough money, you wouldn’t be able to pay it back.
What type of businesses do you lend to?
We can look to assist companies that have been trading for longer than 6 months and have card takings of at least £5,000. Cash advances are not available for start-ups.
Will I be credit checked?
Once your application is submitted, and with your permission, we will run credit checks on the business, as well as its directors.
How do I repay a merchant cash advance loan?
Repayment will happen automatically as a fixed percentage of daily sales. For example, if your repayment is 20% of daily sales and you made £1,000 in sales on a given day, then £200 would go towards repayment and £800 would go to you. On days without sales, you will not repay anything.
How long can I borrow for?
Cash advances are variable, as the repayments can vary month to month depending on how much you take in card sales. Typically, each agreement will run for 12 months.
Why choose Aurora Capital for merchant cash advances?
Aurora Capital are experts in business funding in all capacities, and have had years of experience helping clients raise the necessary capital to grow and expand.
Our powerful decision engine pairs businesses looking for quick loans with trusted lenders offering great interest rates and other repayment terms. Whether you’re looking for merchant cash advances, secured or unsecured business loans or property finance, we have the expertise to guide you toward the best decision for you and your business.
Get your free, no obligation quote today!
Prefer to talk? Call us on 020 3355 7462
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