Obtaining A Merchant Cash Advance: How It Works

The appeal of a merchant cash advance lies primarily in its flexibility, affordability and accessibility. From start to finish, all aspects of a merchant cash advance agreement are more accommodating than any comparable credit facility.

Merchant Cash Advance

Obtaining a merchant cash advance can be surprisingly straightforward and almost any business that processes card payments can apply.

How to Obtain a Merchant Cash Advance

Applications for MCAs can be processed remotely, meaning no need to meet with a provider in person. The help and support of a specialist broker throughout the process can prove invaluable, ensuring you get the best possible deal from a top-rated lender.

As for the application process itself, obtaining a merchant cash advance is as simple as follows:

  1. The business approaches a merchant cash advanced specialist with a request for funding, ideally with the help and support of a qualified broker.
  2. Average monthly card transactions are assessed by the lender, who then calculates the maximum loan size the SME is eligible for.
  3. An offer is made to the SME, inclusive of all interest and borrowing costs – deducted at the time the loan is issued.
  4. For example, if the SME takes out a loan of £25,000, they may actually receive £24,000 in their business bank account.
  5. If the SME is happy with the terms and conditions of the agreement, the contract is signed and the funds are released (often within just 24 hours).
  6. The business can then use this money as they like, with no specific restrictions
  7. Each month, the lender collects a fixed percentage payment of all card transactions processed – typically 10% to 25%
  8. This continues until the money borrowed is repaid, and each monthly repayment is tied to the actual credit card transactions processed by the business.

With a merchant cash advance, you pay more when takings are good and less at other times. This makes it a significantly more flexible facility than a standard business loan, which may attach a fixed monthly repayment with little room for manoeuvre.

What Can a Merchant Cash Advance be Used For?

Upon receiving a merchant cash advance, the funds can be used for any legal purpose whatsoever. No restrictions are placed on how the money is spent, which is technically handed to the business in cash to do with as it pleases.

Again, this makes an MCA more flexible and accommodating than most commercial loans, which tend to come with a long list of restrictions.

Just a few of the most common applications for merchant cash advances are as follows:

  • Funding business expansion
  • Covering marketing and advertising costs
  • Developing and introducing new products
  • Diversifying services provided
  • Purchasing equipment and inventory
  • Opening new premises in new locations
  • Relocating to new premises
  • Consolidating other debts and outgoings
  • Paying utility bills
  • Covering staffing costs
  • Paying unexpected tax bills
  • Conducting the repairs and renovations

Merchant cash advance issuers do not request any information as to how the funds will be spent, giving the business the freedom to allocate the funds in any way it likes.

Who Can Qualify For a Merchant Cash Advance?

Compared to conventional business loans, eligibility requirements for MCAs are fairly relaxed. You simply need to be taking a minimum of £2,000 per month in credit card transactions, and be able to provide evidence of three or more months of consistent performance.

It is even possible to qualify for a MCA with bad credit (or no credit at all), or if your SME has only been in business for a few months.  Many of the criteria that would count you out of the running on the High Street need not necessarily stand in your way of optimising cashflow with a merchant cash advance.

For more information on any of the above or to discuss the benefits of merchant cash advances in more detail, contact a member of the team at UK Commercial Finance today.