Feature your business on Spotdif
Learn more
Spotdif Logo

Access Cash Quickly: Compare Merchant Cash Advance Lenders

Not sure where to start with alternative financing? We can help you compare merchant cash advance loans so your business gets the best deal.

featuredIcon
100% Free
and no obligations
featuredIcon
Match with
local accredited installers
featuredIcon
Reduce
your monthly energy bills
What's In This Guide

The power of merchant cash advance

A merchant cash advance could represent the right solution if you need money fast. You'll receive cash upfront that you can use for any business purpose. Then, you'll repay through a proportion of your debit/credit card sales or directly from your bank. Even if your business has previously been rejected for a loan or has a poor credit rating, you could still get a merchant cash advance in the UK. 

 

Scalable and flexible, merchant cash advance loans are worth considering if you’re looking for a different way to finance your business. You could be approved in 24 hours and they’re ideal if you have few assets but high card sales.  

 

However, it’s important to find the right MCA lender — otherwise, your advance may work out more expensive than a traditional loan. Moreover, the amount you can borrow is limited by your current turnover so comparing offerings from merchant cash advance lenders is key to successful borrowing.

 

Fortunately, you can compare merchant cash advance companies and lenders in your area with SpotDif. Just a few simple questions, and you could be on your way to getting approved for a business cash advance.

The SpotDif guide to merchant cash advance loans

Read on for all you need to know about merchant cash advance loans — from benefits and drawbacks to repayment methods.


What is a merchant cash advance? 

A merchant cash advance is a new way of financing your business. If your SME is asset-light but card payment-rich, it could be the funding solution for you. 


Merchant cash advance companies lend you a lump sum of cash. This payment is generally one to two times your credit/debit card receipts. In return, you pay a percentage of your card sales every month. 

 

Generally, an MCA works like this:


  • Merchant cash advance lenders work out your factor rate and lend you money based on it. 

  • You’ll pay a small percentage of your sales (plus interest) daily, weekly or monthly until the debt is repaid. 

  • The higher your card sales, the quicker the debt is repaid.

Merchant cash advance companies work with your card terminal provider to assess how much your business receives in card sales. This information is the basis for how much you can borrow. Most SMEs are accepted, providing they meet the lender's criteria. And you could raise a substantial sum of cash fast — up to £300,000


So how does it work? You can borrow money fast and pay it back at a factor rate of anywhere between 1.1 and 1.5.  


You borrow £10,000 at a factor rate of 1.1 or 10p for every £1 borrowed. You’ll pay back £11,000. 


Your factor rate depends on: 

  • Your monthly card payments 

  • How much you’re borrowing 

  • The projected time to repayment  

  • Your likelihood of defaulting 

  • How long you’ve been trading 

 

Because the payment is taken at source, the factor rate stays the same if you take longer to repay. Making minimum repayments on an APR loan could mean you pay back much more over the lifetime of the loan. And because the factor doesn't fluctuate, you'll do away with bank rate volatility.

How do merchant cash advance loans differ from traditional bank loans?

Wondering about the differences between a merchant cash advance and a traditional bank loan? 

 

  • With a merchant cash advance, your loan is unsecured: you don’t need collateral to get an MCA. Instead, your eligibility is based directly on your business card payments and the money you make. 

  • Merchant cash advance loans adapt to your business, so the time it takes to pay off your loan is determined by your card receipts. 

  • Standard business loans incur early repayment fees, whereas you can back an MCA at a pace that suits your business without any charges.

     

What can you use a merchant cash advance for? 

One of the reasons merchant cash advance loans are so popular is that you can use the money for any legitimate business purpose. For example, you may need to cover a cash-flow shortage or an emergency bill. Other uses include: 

 

  • Purchasing stock and equipment 

  • Repairs or a premises refit 

  • Inventory purposes, e.g. funding a large stock order 

  • Working capital 

  • Marketing and advertising strategies 

  • Paying tax and VAT bills 

 

If you want to grow your business now, merchant cash advance companies can approve your loan in 24 hours. 

 

With this in mind, what types of businesses would benefit from a merchant cash advance? 

 

  • eCommerce stores 

  • Restaurants and takeaways 

  • Hotels 

  • Pubs and bars 

  • Garages and service stations 

  • Hairdressers and beauty salons 

  • Trades like carpenters, electricians and plumbers 

 

Of course, this is just a snapshot of vendors and businesses who may find an MCA useful. If you receive payments via a card terminal, you could use an MCA to pay off debts, refit your premises or invest in extra inventory. 

 

What is the difference between a merchant cash advance loan and working capital loan? 

A working capital loan is an alternative to a merchant cash advance. Your working capital is straightforward to calculate — subtract your liabilities from your assets, for example:  

 

Total current assets = £275,000 

 

Total current liabilities = £165,000 

 

Positive working capital = £110,000. 

 

A working capital loan is typically secured on your assets and can be used for day-to-day operating expenses. Unsecured loans are based on your personal credit score. Your loan is usually paid back within 12 months. It’s a useful way to finance businesses that deal in seasonal goods and services.  

 

Types of working capital loans include: 

 

  • Business line of credit 

  • Business credit card 

  • Invoice financing 

 

Working capital loan VS merchant cash advance 

To work out which is better for your business — working capital loans or merchant cash advance loans — consider the following points:

 

  • Loan structure: Unlike MCAs, repayments for a working capital loan aren’t tied to your card transactions. You’ll need to find the funds another way.

  • Repayments: With a working capital loan, you’ll pay APR and could face charges for early repayment that you won’t with an MCA.  

  • Approval: A merchant cash advance loan isn’t tied to your assets or credit score, making it easier to obtain than a working capital loan. 

  • Use of loan: Some working capital loans have limits on how they can be used. In contrast, an MCA can be used for any legitimate business purpose.  

  • Credit score: Working capital loans secured on your credit score could have a negative impact if you miss repayments. 

  • Seasonal: Repayments on a merchant cash advance will fluctuate with your debit/credit card income. Whereas working capital loan repayments are likely to be set regardless of your income.

 

You can compare different types of business loans in seconds to find the best financing for your SME.

Borrowing and paying a cash merchant loan

How do I pay off a cash advance from a merchant?

Traditional bank loans have a set repayment period with set monthly repayments. With a merchant cash advance, repayments are automatically deducted from a portion of your credit/debit card receipts: 

 

  • No monthly repayments 

  • No APR 

  • No hidden fees 

  • No early repayment or late penalties 

  • One fixed one-off fee 

 

So you only pay when your customers pay you. And there’s none of the stress of making a regular repayment to worry about. Additionally, there’s no negative impact on your sales revenue. 

 

For example, let’s say your business receives £7,500 in funding. 

 

Of every £100 you earn:  

  • £90 goes into your account

  • £10 goes to your merchant cash advance lender 

 

Alternatively, you can exit your merchant cash advance at any time. Just pay back the remaining amount and the one-off fee. There are no penalties for paying back early. 

 

You could take out another loan if you don't have the cash to exit the MCA. Or grow your business and repay your business cash advance faster.

  

How much can I borrow on a merchant cash advance? 

The amount you borrow depends on your monthly card receipts. So, the more debit/credit card business you do, the more you can borrow.  

 

Different merchant cash advance direct lenders have different criteria. But depending on their risk analysis, you could be eligible for a lump sum of 150% of your monthly turnover. 

 

What is a merchant cash advance provider?  

A merchant cash advance provider will advance you a lump sum of money and organise repayments from your card receipts. They’ll work with your card terminal provider to take your repayments at source. They’ll also set your factor rate and offer optimal solutions for your business funding needs.  

 

With so many merchant cash advance lenders out there, finding the right company to work with can be a challenge. At SpotDif, we compare the best lenders in your area so you always find the best deal on your next business loan. 

Pros and cons of merchant cash advance


The benefits of a business cash advance
  • Speed: Depending on your lender, the cash could be in your account within 24 hours. 

  • Flexibility: You only pay back when you receive credit card payments so that you can manage your cash flow. 

  • Unsecured: A merchant cash advance loan is secured on your credit/debit card payments, so you don't need to use your business assets as collateral. 

  • Approval rates: Around 90% of businesses meet the qualifying criteria. They're a great option if you don't have many assets or haven't been in business long. 

  • Credit ratings: Repayments are made on card sales, so your personal credit rating won’t be negatively impacted, and you’ll never miss a payment. 

  • Repayments: Repayments are taken directly at the source, so you won’t need to juggle your cash flow as the loan looks after itself. 

  • Ease of application: You won’t need to submit a traditional business plan to secure your loan. 

  • No hidden fees: The factor rate is set at the start of the loan, and there’s a one-off fee. You won’t pay any penalties or early repayment charges. 


The drawbacks
  • Fees: You won't reduce your fees if your business is in a stronger position to repay the loan. 
  • Limited to card receipts: You won’t qualify for merchant cash advance loans if you only trade in cash, cheques and bank transfers. 
  • Limited borrowing: What you can borrow is limited by your current turnover and doesn’t take into account what your business might be worth in future.

How can I apply for a merchant cash advance?

Applying is relatively straightforward, and your application can be done online. You could have a decision in as little as 24 hours.  Here's a reminder as to what to keep in mind when applying to merchant cash advance direct lenders.


Understand the terms and conditions

You will most likely be accepted if you understand the repayment terms, fees and factor rates. 


Read the small print

Ensure you understand the contract before signing.

 

Keep copies

Once you've been approved, get everything in writing and keep copies. A written record will help you avoid any misunderstandings. 


Be honest

It’s vital that you’re honest about your financial situation. Merchant cash advance companies will check your business revenue and payments, so be upfront from the start.  


Is a business cash advance best for my business?  

A business cash advance could be suitable for your business if: 

 

  • You’re an SME looking for a fast and flexible cash injection 

  • You’ve been trading for at least 3 months 

  • You have a strong track record of credit/debit card payments 

  • You’re in retail, hospitality or trades 

  • You don’t have many assets  

 

A merchant cash advance offers unsecured borrowing. So you won’t need to secure your loan against equipment or property. However, because your lender is taking more of a risk, the cost of borrowing can be more expensive. 

 

Overall, a cash advance could work for you if you need money fast to develop your business, invest in inventory or improve your cash flow in the short term. 

 

What to look for when comparing merchant cash advance lender's quotes  

These are the critical things to look out for when you’re comparing quotes from merchant cash advance lenders: 

 

  • Fees: Compare fees to get the most competitive rates overall. 

  • Terms: Look at repayment terms to make sure you can meet them. 

  • Qualifications: Are there any hidden lending requirements? 

  • Benefits and features: Look at repayment terms, introductory rates and one-off fees.

      

Compare merchant cash advance loan lenders with SpotDif  

Now you know more about merchant cash advance loans and how they could work for your business, it’s time to compare lenders. 

 

Getting started with SpotDif is straightforward. Our goal is to save you time and money by getting the best deal on your loan, no matter if you’re a startup or an established business.  

 

To get started, search for the product or service you want and where. Just answer a few questions about your situation, and we'll match you to the best deals. It's that simple.

Frequently Asked Questions
author
Tansy Dando
Senior Content Manager
I'm always curious to understand and unpick the latest trends for all things wealth and business.
Get Free Comparison
No Obligation
It's Free
Results Local To You