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.
The ultimate guide to comparing merchant cash advance lenders
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 and 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 (depending on the lender).
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 merchant cash advance (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.
Our guide is here to help you gain a deeper understanding of MCAs so you can make an informed decision that supports your business needs. Once you have a clearer idea of the type of service you need, you can compare merchant cash advance lenders using our handy tool. Just answer a few of our simple questions, and you could be on your way to getting approved for a business cash advance.
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Has your business used factoring or cash advancing before?
If you're not sure, don't worry, your provider will be able to guide you through this decision.
What is a merchant cash advance?
A merchant cash advance — sometimes referred to as a business cash advance — is a 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.
Key MCA benefits
Why consider a business cash advance? Here are several of this financing method’s key benefits:
No monthly repayments
No APR
No hidden fees
No early repayment or late penalties
One fixed one-off fee
How much can I borrow on a merchant cash advance?
Merchant cash advance companies work with your card payment machine 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 £400,000
The exact amount you borrow depends on your monthly card receipts. So, the more debit and 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.
How it works
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.
What can you use a merchant cash advance for?
One of the reasons business 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 an ePOS card terminal, you could us
Find trusted merchant cash advance lenders
Merchant cash advance loans vs traditional bank loans
We can see that MCAs come with many benefits. But how do they stack up against alternative loan models? Let’s start by exploring 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.
Which is better?
Deciding which financing option to choose? It really depends on what your business needs and what you’re aiming to achieve. If you find your business has strong credit card sales but you're short on collateral, a merchant cash advance (MCA) might be just what you need.
A merchant cash advance is best for: In our experience, businesses with ups and downs in their sales can benefit from an MCA because you pay back more when you earn more and less when times are tough. Perfect for seasonal businesses, don’t you think?
On the other hand, do you see a consistent cash flow in your business and you can offer some collateral? Then a traditional bank loan could be a better fit. They usually have lower interest rates and fixed repayments, making planning ahead a lot easier.
A traditional bank loan is best for: We recommend this for businesses that are more established and aiming for long-term investments.
Whatever you decide, we’re here to help you understand your options and make the best choice for your business.
Working capital loan VS merchant cash advance
A working capital loan is an alternative to a merchant cash advance. Before we compare the two to see which is best for you, let’s run over what a working capital loan entails.
A working capital loan can help you cover the everyday operational expenses of a business, such as paying staff or purchasing inventory. This loan helps you manage your business’ cash flow — particularly if you face seasonal fluctuations in income or unexpected costs.
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 can be secured against the business’s assets or based on your personal credit score. It’s typically structured to be repaid within a short period, such as 12 months. This makes working capital loans particularly useful for businesses that need to bridge gaps in their cash flow to keep running smoothly.
Types of working capital loans include:
Business line of credit
Business credit card
Invoice financing
Which is best for you?
The big question: Which is better for your business — working capital loans or merchant cash advance loans? Let's break down the key differences to help you choose the best financing option for your business
- Loan structure: Merchant cash advances (MCAs) tie your repayments to your card sales. This means you pay more when business is booming and less when it's slow, providing flexibility if you’re worried about inconsistent sales.
On the other hand, repayments for a working capital loan are fixed and require funding from other sources. As mentioned, this could be secured against your business assets or based on your personal credit score.
Repayments: With a working capital loan, you'll face APR and potential charges for early repayment. An MCA, however, does not incur early repayment charges, which can be a relief if you prefer more predictable costs.
Approval: An MCA might be easier to obtain than a working capital loan as it isn’t tied to your assets or credit score. This can be particularly beneficial if your credit history isn't strong.
Loan use: Merchant cash advances offer the flexibility to use funds for any legitimate business purpose without restrictions. Working capital loans might limit how you can spend the funds, which could affect your decision.
- Credit score: Remember, working capital loans can impact your credit score if you miss any repayments since they are often secured against your credit. If you know you have any concerns over your credit, we suggest speaking with your financial advisor and considering a merchant cash advance instead of a working capital loan.
- Seasonal businesses: While both MCAs and working capital loans can be helpful for seasonal businesses, a merchant cash advance could be more manageable to stay on top of. This is because it adjusts to your card income, unlike fixed repayments required by working capital loans.
Paying back a merchant cash advance loan
Now you hopefully have a clearer idea of how merchant cash advances compare with other loan options, let’s look more closely at how you pay back your MCA.
While both traditional bank loans and working capital loans have set monthly repayments, a business cash advance is a little different — repayments are automatically deducted from a portion of your credit and debit card receipts.
This means that 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
You can also 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.
Compare Merchant Cash Advance Lenders with SpotDif
Has your business used factoring or cash advancing before?
If you're not sure, don't worry, your provider will be able to guide you through this decision.
Who provides merchant cash advances?
A merchant cash advance lender 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. The lender will also set your factor rate and offer optimal solutions for your business funding needs.
Here are some of the top merchant cash advance lenders in the UK that you might consider for financing your business:
Capify: Capify is known for its straightforward application process and quick funding, often within days. They cater specifically to small and medium-sized businesses.
Liberis: This company provides funding based on future credit and debit card sales, offering flexible repayment terms that adjust according to your business's income levels.
365 Business Finance: They specialise in merchant cash advances for small to medium-sized businesses and are known for their quick approval process and lack of fixed repayment terms.
Quick Capital: Quick Capital offers a fast application process with no security or business plan required. Their repayments are directly tied to your card sales, which can ease financial pressure during slower periods.
Funding Circle: While primarily known for peer-to-peer loans, Funding Circle also offers merchant cash advances as part of their portfolio, providing competitive rates and terms for various business needs.
These lenders offer different advantages depending on your specific business requirements and cash flow situations, so it’s important to review each option carefully to find the best match for your business.
What to look for in merchant cash advance lenders
Choosing the right merchant cash advance lender is vital for your business — you want to make sure you’re sourcing your alternative finance from a trustworthy and reliable company. But what exactly makes a good MCA lender?
Competitive rates
First, let's look at the funding they offer. It's essential to make sure it meets your needs. You also need to check the factor rate, which determines the total amount you'll repay. We suggest opting for a lender with competitive rates — lower rates mean you pay back less overall.
A fair repayment percentage
Another important aspect is the repayment percentage — this is how much of your daily card sales the lender takes as repayment. A lower percentage will have less impact on your daily cash flow.
A straightforward application process
We also recommend evaluating the ease of the application process. A straightforward process with clear tracking of your repayments can save you a lot of time and hassle. This often comes down to the quality of their software. Is it user-friendly? Does it provide real-time insights into your balance and payments?
Great customer service
Customer service is pivotal, too. Look for a lender who is responsive and ready to help, able to quickly solve problems and answer your questions. This can make managing your finances much easier.
Flexibility
Additionally, consider how flexible the lender is with payment terms. If your business income varies, finding a lender that adjusts payment demands based on your sales can be hugely beneficial during slower periods.
Positive testimonials
Lastly, take time to read reviews and perhaps talk to other business owners who have used the lender’s services. Their experiences can offer valuable insights and help you make an informed decision.
Compare merchant cash advance lenders with SpotDif
Last updated on 29 May 2024