A Business or Merchant Cash Advance (MCA) is fast becoming a FLEXIBLE way for retailers to access funds.
If you have been trading for at least 6 months and have built up strong credit/debit card sales volumes, you can benefit from funding that is quick and simple to obtain. And there is no need to change banks or acquirers!
How it Works
An MCA allows you to raise capital for your business by selling the anticipated future card sales for a ‘discount’. More about what that means later*. If your business has been accepting card transactions for at least the past 6 months, you will probably qualify for an advance.
The maximum advance you can get is roughly equivalent to between 100-150% of the average monthly turnover you put through your card machine. So long as you are turning over an average of £2,000 a month in card sales, you should be accepted.
Funders rely on your past trading history to determine what they can advance, so with a good trading period behind you, you should be able to access even more funds at this testing period in the sales cycle.
It is always important to understand how much discount you are paying for a facility. In this representative example we are discounting a future transaction value calculated at £30,000:
Amount of funding Agreed: £30,000
Future Discount 15%: £4,500
Advance Received: £25,500
In this example, you will receive £25,500 cash in advance of paying back £30,000 – over a FLEXIBLE period of time, as determined by the repayment plan as described below.
You agree from the outset to give a percentage of every future debit/credit card sale towards repaying the agreed amount of funding before discount. This is usually in the range of 10-20% of your daily card settlement, collected via an automated arrangement, usually made with your card-acquirer.
The simplicity of this product is that you repay at the pace your business grows. Because repayments rise and fall with your sales, you’ll never need to worry about being short at the end of the month. And because there’s no fixed term to the repayments, there’s never really any pressure. With an MCA, there is no such thing as a missed payment, you only pay when you sell.
Getting the facility approved can often happen on the same day – with the facility taking as little as a few days to set up. In some cases this may take a few days longer – as that depends on how you currently process your payments.
Once you have paid off 50-60% of your initial advance, you can apply for a ‘top-up’ or larger amount. The finance available grows with your business, so often clients repay sooner than anticipated and refinance quicker.
No Security Required
This is a completely unsecured facility, though most lenders will ask for a personal guarantee from the business owner.
A Merchant Cash Advance is based on your business’s trading record and your anticipated ability to repay as illustrated by your debit/credit card sales. Credit ratings are therefore less important to the funder.
We do not require you to produce full accounts or management accounts in most cases. Initially, we will just ask for the last 6 months’ credit card acquirer statements, and the last 3 months of business bank statements. (In the aftermath of the pandemic, you may be asked for 12 months data to show a better annual trend). The funder will also request some identification documents to satisfy their KYC requirements.