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Merchant Cash Advance???

What is a Merchant Cash Advance?

A merchant cash advance is a finance payment agreement which is based on a percentage of forecasted sales from debit/credit card transactions. This type of payment advance from a merchant finance provider gives applying businesses a lump sum, which gets repaid automatically once customer card sales receipts come through.

Merchant cash advances are deemed by many as a quick and convenient form of funding and have grown widely popular in the UK, especially among businesses which receive sales in a seasonal manner.

Advantages of a Merchant Cash Advance

  • Quick, convenient funding access – the merchant finance approval process is fast, with financiers being able to make a decision and deliver the payment advance usually within days.
  • Flexible funding and repayments – repayments are based on future sales so if you are expecting a quiet period, you will pay back less. This scalable feature puts you under less pressure as the amount you pay back aligns with your business performance.
  • Fixed agreement with no APR – instead of an annual percentage rate which is common with loan repayments, a merchant finance agreement uses a factor rate as a percentage of your future card sales.
  • Funding without collateral – if you are unable or do not wish to put forward collateral as security, it is okay as it is not required. Instead, a positive record for over 1 year of trading, showing high-volume monthly card transactions will usually be sufficient to qualify your application.

Merchant Cash Advance Eligibility and Examples

Any business that uses a card terminal machine (also known as a PDQ or Chip and Pin machine) to process customer sales, in theory could be eligible for a merchant cash advance.

If you can demonstrate a consistent level of monthly cash inflow – usually 6 months of card payment statements will suffice. Businesses within industries which experience a high volume of monthly transactions such as bars and restaurant services within hospitality, leisure, fashion retail and automotive servicing are usually a good fit for merchant advances.

There are various ways in which you could use your merchant cash advance, such as for store improvements, obtaining new equipment, boosting your inventory or cash flow or even managing debt payments. Whatever you need it for, merchant cash advances could be the financing tool for your business.