Merchant Cash Advance explained
A Merchant Cash Advance is an unsecured finance option that is generally short term and quite flexible. It is used for cash flow management, growth, refurbishment or purchasing stock.
Loans are offered with an agreed total amount repayable. This figure is based on your business’ annual revenue to ensure repayments are manageable and you only pay as you earn. With a Merchant Cash Advance, repayments are generally taken as a fixed percentage of revenue through PDQ terminal payments.
This type of finance suits any business that regularly uses PDQ (Process Data Quickly) transactions, such as those in retail, ecommerce or hospitality. Repayment time is dependant greatly on the amount of revenue you earn – making APR comparison difficult.
What do I need to know about Merchant Cash Advance?
A merchant Cash Advance is used for cash flow management, growth, refurbishment or purchasing stock
The amount you can borrow will be based on your revenue, but generally you can borrow anything up to £100,000. Unlike most loan solutions, the repayment amount is decided upon beforehand – for instance, for a £10,000 loan could have an agreed repayment of £13,000, and the amount of time this takes to pay back will depend on your revenue.
There may be times when you need to improve cash flow for your business quickly and easily in order to invest in growing your business or simply to stay afloat. Merchant Cash Advance (or Business cash advance as it is sometimes known) is one option that many companies, especially in the retail and hospitality sectors, are using to achieve this.
How does Merchant Cash Advance work?
If you are approved for this product you will be given up to 85% of an average month’s income as a cash advance. You will be advanced this money as a lump sum and will pay back an agreed percentage per customer or business card transaction. It will be taken automatically as you make your sales. This is how you pay off the loan. It happens automatically and you are provided with regular statements to say how much you have paid off. You only ever pay off the agreed percentage of the sales you make. So, if you have a day of high sales you pay more than on a day when you take less money.
What are the requirements?
The figure is based on your businesses’ annual revenue to ensure repayments are manageable and you only pay as you earn
In order to qualify for this type of loan you need to use a PDQ (Process Data Quickly) terminal for credit and debit card payments.
You will also be required to provide lenders with:
- Evidence of a minimum average customer spend per month (this will vary depending on the lender)
- A minimum of 12 months trading statements through your PDQ
- Some lenders may require statements such as rent payments for credit assurance
What sort of businesses use Merchant Cash Advance?
Thousands of businesses choose this type of loan as the paperwork is it offers a fairly easy to secure loan as opposed to bank loans or overdrafts.
The sorts of businesses that use Merchant Cash Advance include:
- Pubs and Restaurants
- Automotive services
- Health and Beauty
- Automotive industry
- Other high street stores
Benefits of Merchant Cash Advance
- Pay back only as you earn
- Finance from £2,500 to £500,000
- Quick access to funds
- Flexible repayment options