Explaining merchant cash advance

Merchant cash advance (MCA) is a type of financing that provides businesses with quick access to cash by advancing funds based on future sales, typically credit card sales. MCAs are popular among the small business community who need fast funding but may not qualify for traditional loans.

Here’s a detailed explanation of how they work, their benefits, and things to consider.

How does merchant cash advance work?

• A lender will provide a business with a lump sum of cash which is then repaid based on a percentage of the company’s future credit card sales.
• Repayment structure will be automatically deducted from ongoing sales until the advance and any respected lender fees are repaid. Obviously the larger the sales the quicker the funding can be repaid. 

Benefits of merchant cash advances

• Fast access to funds – applications are generally very quick (within 24 to 48 hours) and minimum paperwork is required in comparison to traditional loans. It is an ideal solution for business who need a quick boost in cash flow to cover expenses such as payroll, inventory or repairs.
• Flexible repayment – repayment is based on the number of sales received so, as revenue fluctuates, the repayment amounts will also adjust automatically. For example, if sales do become low, then a business will pay less allowing breathing space to navigate through the period until sales start to increase again.
• No collateral – generally an MCA agreement will not require any upfront collateral, ideal for small businesses who do not have significant assets. The approval of the funding is based on the business’ sales history and future earning potential. A lender will focus an application on sales volume and not the owners personal credit situation.

Who should consider a merchant cash advance?

• Businesses with high levels of credit card sales (e.g. restaurants, retail shops, leisure facilities and e-commerce stores).
• Businesses with an urgent requirement to boost cashflow levels.
• Businesses who are expecting rapid growth in revenues.

Merchant cash advances will provide fast and flexible funding. As with any form of business funding it is important to understand the terms, fees and repayment structure.

If you have any questions or would like some help with a merchant cash advance, please call us on 01993 706403 or e-mail enquiries@ngifinance.co.uk.