Specialist Merchant Cash Advance Broker for the Trades

Merchant Cash Advance Explained

A merchant cash advance is business funding repaid through a fixed percentage of your card takings. There is no monthly instalment to find and no fixed end date. Your card terminal provider passes an agreed slice of every transaction to the funder until the advance and its fee are cleared, so money leaves the business at roughly the same speed it comes in.

We are a finance broker rather than a lender, so we put your card statements in front of several providers at once and tell you plainly when a business loan or invoice finance would cost less. What follows covers how the split percentage behaves week to week, what an advance costs in pounds rather than percentages, what happens during a quiet winter, and where this funding beats a bank loan for a trade business.

What is a merchant cash advance and which trades does it suit?

A merchant cash advance is an unsecured lump sum advanced against your future card sales. The funder looks at what your business takes through its card machine each month, advances a proportion of that, then recovers the money as a share of every card payment your customers make. Nothing is secured against your home, van or tools, which is the main structural difference from most business finance.

It suits trades where a real share of income arrives by card: domestic work paid on the doorstep by mobile card reader, showrooms and trade counters, fitters taking deposits by card, and any business with a till. The more consistent your takings, the more a funder will advance and the better the rate. If almost all your money arrives by bank transfer against a 30 day invoice, this is the wrong tool and we will say so.

There is no restriction on what the money is spent on, because the funder buys a share of your future card receipts rather than lending against an asset. Most businesses use it for materials and stock ahead of a busy season, tools or wages.

How does repayment through your card sales actually work?

Repayment on a merchant cash advance is collected automatically as a fixed percentage of every card transaction, a figure the industry calls the split. It is typically 10 to 15 percent of your card takings, agreed before you sign and fixed for the life of the advance. Collection happens at the card processor, so there is no direct debit to bounce.

A worked example. You turn over £15,000 a month through the terminal and agree a 12 percent split. On a day you take £600 in card payments, £72 goes to the funder and £528 lands in your bank as normal, which over an average month is about £1,800 off the balance. You are never asked to find a payment.

The important part is what happens in a quiet month. If January takings drop from £15,000 to £7,000, the 12 percent split collects £840 rather than £1,800. The funder takes less because you earned less, and no arrears are recorded because there is no scheduled payment to miss. The total you owe does not grow. It simply takes longer to clear, which is the feature that makes this work for seasonal trade businesses.

What does a merchant cash advance cost in pounds?

A merchant cash advance is priced using a factor rate rather than an interest rate. The factor rate is a single multiplier applied to the sum advanced, typically 1.1 to 1.5, and it fixes your total cost on day one. Nothing accrues, compounds or gets added if repayment runs long.

So on a £20,000 advance at a factor rate of 1.35, you repay £27,000 in total. The cost is £7,000, and that figure is the same whether it clears in eight months or sixteen. Compare that with an overdraft, where a slow month means more interest. Here a slow month costs nothing extra, and there are no early repayment charges, so a strong summer simply gets you to the end sooner.

Be realistic about how that compares with business loans. Because you repay steadily rather than in one lump at the end, you never hold the full £20,000 for the full term, so the effective annualised cost is considerably higher than the factor rate suggests, often close to double it. You are paying a premium for speed, flexible repayment and a credit assessment that leans on takings rather than your credit file.

How long does it take to repay a merchant cash advance?

There is no fixed term. Repayment runs for however long your card sales take to clear the agreed total, which for most trade businesses is six to twelve months, occasionally stretching to eighteen. Estimate it before you sign by dividing the total repayable by your monthly card takings multiplied by the split.

Using the same numbers, £27,000 repayable against £18,000 of monthly card sales at a 12 percent split gives £2,160 a month, clearing in around twelve and a half months on current trading. Funders model the term on a conservative view of takings, so if their figure looks longer than your own maths, that is why.

For seasonal trades the profile matters more than the average. A landscaper or roofer might clear half the balance between April and September and barely touch it in January, which is how the product is meant to behave. The flip side: while a balance is outstanding, a slice of every card sale is committed, so borrow what the business needs rather than the maximum offered.

Should you go direct to a lender or use a broker?

Merchant cash advance direct lenders are a small group of specialist funders, plus a few card terminal providers who offer advances to businesses already processing payments through them. Going direct is straightforward, but you see one set of terms, and the offer from your own terminal provider is not automatically the strongest available.

Using a broker means one set of card statements is assessed by several providers, so you compare total repayable, split percentage and advance size side by side. It also means someone tells you when the answer is no. We are paid a commission by the funder when a deal completes, which we confirm to you, and it does not change what you repay.

One point matters either way. These advances are generally treated as unregulated business funding rather than Financial Conduct Authority regulated consumer credit, because the agreement is a purchase of future card receipts rather than a loan. Reputable providers still work to recognised industry codes and publish clear pricing. Sole traders should ask the funder to confirm the regulatory position of their agreement, and everyone should read the terms on personal guarantees and on changing card processor mid advance.

What do you need to qualify, and how do you apply?

Eligibility rests on card takings rather than balance sheets. As a guide, providers look for at least three to six months of trading, monthly card sales of around £2,500 or more, a UK registered business, and card payments that are reasonably consistent rather than one seasonal spike. Limited companies, sole traders and partnerships all qualify.

The paperwork is light. Three to six months of card processing and business bank statements is usually the whole file, with no accounts, forecasts or business plan required. We take basic details, what the money is for and roughly what you take by card, then approach providers on your behalf. Decisions commonly come within 24 hours and funds land one to three working days after acceptance.

This is not a no credit check product, whatever some adverts imply. Funders do check, but card takings carry far more weight than a credit score, which is why a historic CCJ often does not stop an approval when a bank would decline. If your credit file is the obstacle, tell us up front; it changes which providers we approach.

Merchant cash advance or business loan: which works out better?

The comparison comes down to how predictable your income is. Short term business loans have fixed monthly repayments and, for a business with steady income and a decent credit profile, almost always work out cheaper in total cost. If you can comfortably commit to the same payment every month for two years, take the loan.

An advance wins on four things. Repayments flex with trading, so a bad month costs less rather than putting you in arrears. Approval leans on takings, which opens the door for businesses banks decline. Funding is fast, often days rather than weeks. And nothing is secured against your property, so a downturn does not put your home at risk.

In practice, tradesmen use advances for short, self liquidating needs: stocking up before a busy season, covering a wage gap, taking a job that needs materials paid up front. For a van or a machine, asset finance is nearly always the better structure and we would point you there instead.

What are the alternatives to a merchant cash advance?

Revenue based finance works on the same principle but tracks total turnover rather than card sales alone, collecting repayments from your bank account as a percentage of all income. It is the natural alternative for a trade business paid through a mix of card, bank transfer and invoice.

A revolving credit facility gives you a limit to draw down and repay as needed, with interest only on what is outstanding. If your cash flow problem is recurring rather than one off, revolving credit often costs less over a year than repeated advances. Invoice finance suits businesses working for main contractors on payment terms, releasing most of an invoice as soon as it is raised.

Cheaper options get overlooked too: extended supplier credit at your merchants, a business credit card for smaller material purchases, or asset finance where the money is really for equipment. We arrange most forms of business finance, so the conversation starts with what the funding is for.