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4 Jan 2024

How do merchant cash advances work?

Anna Dearden
Home Sector Specialist

Are you scratching your head over business finance options? If you're in retail, whether running a small shop or part of a larger outfit, you might have stumbled upon merchant cash advances (MCAs)

Navigating the world of business funding can be tricky, especially when it comes to business jargon. So, what exactly is a merchant cash advance, and how can they work for your business?

What is a merchant cash advance?

A merchant cash advance is not your typical loan. Think of it as an advance on your future sales. Essentially, you receive a lump sum upfront, and in return, you agree to pay back this advance, plus fees, through a percentage of your daily credit card sales. 

It's a popular choice for businesses that need funds quickly and have a high volume of card transactions. Why? Because it's fast, often with less stringent credit requirements than traditional loans.

How it works

The process begins with a business seeking capital opting for a merchant cash advance. The business then enters into an agreement with an MCA lender. In return for a cash advance, the business agrees to remit a specified percentage of its daily credit and debit card sales until the total amount borrowed, along with the agreed-upon fee, is repaid in full.

The repayment structure of an MCA differs from traditional loans in that it is tied to your business's daily revenue. This means that on days when the business generates more card sales, the repayment amount will be higher. Conversely, on slower days, the repayment amount will be lower. This flexible repayment structure can be advantageous for businesses with fluctuating sales.

Why might a business benefit from a merchant cash advance?

There are several reasons why your business would benefit from a merchant cash advance. From increased flexibility to added peace of mind, an MCA can be a valuable tool.

Quick access to capital

One of the main advantages of a merchant cash advance is the speed at which businesses can access much-needed capital. Traditional loan application processes often involve extensive paperwork and approval timelines, which can be cumbersome and time-consuming. In contrast, MCAs typically have a faster approval and funding process, allowing you to obtain funds swiftly when you need them most.

What’s more, traditional loans tend to focus on a credit check. With a merchant cash advance, the lender will determine your eligibility by looking at your cash and credit card sales.

No collateral required

Unlike many traditional loans that may require businesses to put up assets or personal guarantees as collateral, merchant cash advances are unsecured. This means that businesses do not need to risk their valuable assets to secure funding. Instead, the lender assesses the health of your business's cash flow and credit card sales when determining eligibility.

Flexible repayment structure

The repayment structure of MCAs is based on a percentage of daily card sales. This flexibility can be ideal for businesses with seasonal or variable revenue streams. During slower periods, you won’t need to worry about fixed monthly payments that can strain your finances. Instead, the repayment adjusts proportionally to your sales, making it easier to manage cash flow.

It’s worth noting that a merchant cash advance may involve a fee higher than the interest rates of a traditional loan. However, the fee is determined upfront and won’t change, giving you a clearer idea of the overall cost.

How much can I borrow on a merchant cash advance?

You can generally borrow up to £300,000 with a merchant cash advance. However, the exact amount will vary, depending on several factors. These include your business's daily credit and debit card sales and its overall financial health, as well as the lender's policies.


It's important to note that MCA lenders assess the potential risk associated with the advance and may cap the amount accordingly. In addition, the terms and conditions, including the repayment percentage and fee, will vary among lenders, so it's essential to carefully review and compare offers before committing to an MCA.

Choosing the best merchant cash advance lenders

Selecting the right MCA lender is crucial for businesses seeking this form of financing. To find the best merchant cash advance lenders, consider the following factors first.

Reputation and reviews

Research the lender's reputation and read customer reviews to gain insights into their track record. Look for lenders with a positive history of transparent dealings and satisfied clients.

Terms and fees

Compare the terms and fees offered by different MCA lenders. Pay close attention to the percentage of daily card sales that will be remitted as repayment and the total fee associated with the advance.

Eligibility criteria

Understand the lender's eligibility criteria. Some lenders may require a minimum level of monthly card sales or a specific duration of time in business.


Choose a lender that provides clear and transparent information about the terms and conditions of the merchant cash advance. Ensure that you fully understand the repayment structure and any potential fees.

Customer support

Consider the level of customer support provided by the lender. A responsive and helpful customer support team can be invaluable if you have questions or encounter issues during the repayment process.

Compare merchant cash advance deals with SpotDif

If you’re looking to secure a merchant cash advance for your business venture and don't know where to start, SpotDif can assist you. We specialise in comparing hundreds of merchant cash advances, helping you find the right one for your needs.

Use our price comparison tool to start your search, or get in touch with us today to learn more. We're here to make your journey to financial flexibility as smooth as possible.

Anna Dearden
Home Sector Specialist
Combining in-depth research with an interest in all things home improvement, I aim to keep SpotDif readers up to date with interior design trends, renewable energy options, and more.
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