Merchant Cash Advances – MCA’s What Do You Need To Know?

A merchant cash advance is an injection of a lump sum of cash into a business that is secured by a percentage of future debit or credit card payments into the business. An MCA is effectively a short-term business loan but has many advantages over traditional business loans from a high street bank for example.

 Merchant Cash Advances – How Do They Work?

Lenders that supply merchant cash advances look to fund businesses with an injection of capital in return for a percentage of their future credit and debit card sales. MCA’s are usually relatively short term and the repayments are  taken from daily card transactions rather than a fixed and larger monthly repayment. One advantage of this is obviously cash flow as there is no monthly lump sum disappearing from the business. Lenders agree a partnership with the merchant services provider to facilitate easy daily payment remittances.

Whilst in theory they constitute a loan the reality is that merchant cash advances are actually a sale of the businesses   future card sales. Another big advantage of MCA’s is that repayments are only actually taken when you sell something to a client, so during potentially quiet periods you will not be expected to make a repayment.

MCA’s are a very simple concept and are often a good solution for a business with minimal assets to offer as a loan security.

Merchant Cash Advances – What Are The Advantages

The qualifying criteria for an MCA does vary between lenders and this is where CBS Finance can help to find the most suitable merchant cash advance lender for your specific requirements.

The qualifying criteria for an MCA does vary between lenders and this is where CBS Finance can help to find the most suitable merchant cash advance lender for your specific requirements.

Usually you will have needed to have been trading for 3-6 months and have a relatively strong history of card payments into your business.. Some lenders may want to look at your business credit history but because of the nature of the repayment of a merchant cash advance this is often far more relaxed than traditional forms of borrowing.

MCA’s do not require traditional business plans for analysis, there is little if any security required and the funds can be available to you very quickly – often within just a few days.

Usually there is no fixed term and you pay back the MCA when you receive funds from your customers which eases your cash flow problems significantly.

CBS Finance partner with a large number of merchant cash advance companies – also often referred to as PDQ funding or PDQ loans.

MCA’s can be an ideal quick fix solution to many UK businesses that may not have the ability to secure a traditional business loan and need access to some cash with flexible repayment periods.

Q. What is a merchant cash advance?
A. A merchant cash advance is a loan secured against payments taken on your card terminal.

Q. How does a merchant cash advance work?
A. A merchant cash advance is literally that. A cash advance that is repaid by the lender taking a percentage of your card payments over a period of time.

Q. What are the advantages of a merchant cash advance over a traditional business loan?
A. One of the main advantages of a merchant cash advance is that if sales and cash flow become a little slow then a lump sum monthly repayment is not required, unlike if you had taken out a traditional loan with monthly repayments agreed. Effectively, you only pay when you take a card payment for goods or services, easing cash flow.

Q. How do I apply for a merchant cash advance?
A. Firstly your business needs to have been using a card terminal for a period of time and have relatively strong record of card payments over a consistent period. You do not usually need a credit check as the loan is secured against future card terminal payments.

Q. How exactly are repayments made with a merchant cash advance?
A. Another great advantage of a merchant cash advance is that repayments are taken as small amounts from each card payment that you receive. These repayments are small and regular and for that reason are often easier to manage that larger one off monthly repayments.

Q. Can a merchant cash advance be used for cash flow?
A. Absolutely. A merchant cash advance is ideal for when your business may hit a quiet patch. Also a merchant cash advance is effectively a new line of credit that allows you to use traditional funding methods such as business loans and mortgages as and when required.

Q. What are the downsides of a merchant cash advance?
A. Advances are restricted to a percentage of average monthly card payments so are really more suited to a business that transacts most of its sales via a card terminal. Also many merchant cash advance lenders only work with specific card terminal suppliers.

Q. How much does a merchant cash advance cost?
A. Rates will vary depending on turnover of the business taken on cards and the amount required to borrow. Care needs to be taken to select the most appropriate lender.