What Is a Merchant Cash Advance?

A merchant cash advance (MCA) is a lump sum of funding that you repay through a percentage of your daily debit and credit card sales. Unlike traditional business loans with fixed monthly payments, MCA repayments automatically adjust based on your revenue.

How it works in practice:

You receive £50,000 upfront. The provider takes 15% of your daily card sales until you’ve repaid the advance plus fees (typically a factor rate of 1.2-1.4, meaning you repay £60,000-£70,000 total).

• Busy day with £2,000 card sales:You repay £300 (15% of £2,000)
• Quiet day with £500 card sales:You repay £75 (15% of £500)
• Very quiet day with £100 card sales:You repay £15 (15% of £100)

This flexibility means you never face a fixed payment you can’t afford during slow periods – repayments automatically scale with your revenue.

Key difference from loans: An MCA is technically not a loan – it’s a purchase of future receivables. The provider “buys” a portion of your future card sales at a discount. This distinction means MCAs are not regulated by the Financial Conduct Authority in the same way as loans.

How Does a Merchant Cash Advance Work?

Step 1: Application & Approval

You apply with basic business information and recent card sales data. Providers assess your average monthly card sales (typically need £5,000+ per month in card transactions) and approve you for an advance amount, usually 1-3 times your average monthly card revenue.

Approval speed: Very fast – often same-day or within 24-48 hours.

Credit requirements: More flexible than traditional loans. Providers focus on card sales volume rather than credit scores, though they will check credit history.

Step 2: Receive Funds

Once approved, funds are transferred to your business bank account, typically within 24-48 hours. Some providers offer same-day funding for urgent needs.

Step 3: Automatic Repayment

The provider integrates with your card payment processor (Worldpay, SumUp, Square, Zettle, etc.). Each time you process a card payment, the agreed percentage (typically 10-20%) is automatically deducted and sent to the provider.

Example:

• Advance amount:£30,000
• Factor rate:3
• Total repayable:£39,000 (£30,000 × 1.3)
• Repayment percentage:15% of daily card sales
• Average daily card sales:£800
• Average daily repayment:£120 (15% of £800)
• Estimated repayment term:9-12 months (depending on sales fluctuations)

Step 4: Repayment Completes

Once you’ve repaid the total amount (£39,000 in the example above), the provider stops taking the percentage. You can then apply for a new advance if needed – many providers offer “top-ups” before full repayment if your business is performing well.

Merchant Cash Advance vs. Business Loan: What’s the Difference?

Feature	Merchant Cash Advance	Traditional Business Loan
Repayment Structure	% of daily card sales (flexible)	Fixed monthly payments
Approval Speed	24-48 hours (very fast)	1-14 days
Cost	Factor rate 1.2-1.5 (20-50%+ APR equivalent)	8-25% APR
Best For	Seasonal/fluctuating revenue	Steady, predictable revenue
Repayment Term	6-18 months (varies with sales)	1-10 years (fixed)
Amount	£5,000-£250,000	£5,000-£5,000,000+
Credit Requirements	More flexible (focus on card sales)	Good-excellent credit required
Regulation	Not FCA-regulated	FCA-regulated
Risk During Slow Periods	Low (repayments automatically reduce)	High (fixed payment regardless of sales)

 

Choose an MCA if:

• You need funding urgently (within 24-48 hours)
• Your revenue fluctuates significantly (seasonal business)
• You have high card sales but weaker credit
• You want repayments that automatically adjust with sales
• You need short-term funding (under 18 months)

Choose a business loan if:

• You can wait 1-2 weeks for funding
• You have steady, predictable revenue
• You want the lowest possible cost (loans are much cheaper)
• You need longer repayment terms (3-10 years)
• You have good business credit

When Is a Merchant Cash Advance Right for Your Business?

✅ Good Reasons to Use an MCA:

Emergency funding needs

• Urgent equipment breakdown requiring immediate replacement
• Unexpected opportunity (bulk stock purchase at significant discount)
• Cash flow crisis requiring immediate injection

Seasonal businesses with high card sales

• Retail businesses with strong Christmas/summer trading
• Tourist-dependent hospitality businesses
• Businesses with predictable busy periods

High card transaction volume

• Businesses processing £10,000+ per month in card payments
• Retail shops, restaurants, cafes, salons, gyms

Declined by traditional lenders

• Newer businesses (under 2 years trading)
• Some adverse credit history
• Limited assets for security

Short-term funding needs

• Need funding for 6-12 months only
• One-off investment with quick return

❌ Bad Reasons to Use an MCA:

Long-term funding needs

• If you need funding for 2+ years, a business loan is much cheaper

Low card sales volume

• If most of your revenue is cash, invoices, or bank transfers, an MCA won’t work well

Debt consolidation

• Using expensive MCA funding to pay off cheaper debts makes no financial sense

Non-urgent needs

• If you can wait 1-2 weeks, a business loan will save you thousands in fees

Already struggling with cash flow

• MCAs take a percentage of every sale, which can worsen cash flow problems

Industries Best Suited to Merchant Cash Advances

Retail Businesses

Retail shops with high card transaction volumes are ideal for MCAs. Whether you run a clothing boutique, gift shop, or convenience store, if you process £10,000+ per month in card sales, an MCA can provide fast funding for:

• Stock purchases ahead of peak seasons
• Shop refurbishments to improve customer experience
• Emergency equipment replacement (tills, refrigeration, etc.)
• Marketing campaigns to drive footfall

Example: A gift shop in Edinburgh needs £25,000 to purchase Christmas stock in September. An MCA provides the funds immediately, and repayments automatically increase during the busy Christmas period when the shop can afford them, then reduce in January when sales drop.

Restaurants, Cafes & Hospitality

Having operated a busy restaurant myself for over 10 years, I understand the cash flow challenges facing restaurants, cafes, bars, and hotels. MCAs can help you:

• Replace broken kitchen equipment urgently
• Refurbish dining areas to attract more customers
• Purchase stock for events or busy seasons
• Bridge cash flow gaps during quiet periods

Why MCAs suit hospitality: Your revenue fluctuates significantly – busy weekends, quiet Mondays, peak summer, slow January. Fixed loan payments during quiet periods can be crippling. MCA repayments automatically reduce when sales drop, giving you breathing room.

Example: A restaurant in Glasgow needs £40,000 to replace a broken commercial oven. An MCA provides same-day funding, and repayments flex with daily card sales – higher on busy Friday/Saturday nights, lower on quiet Tuesday lunchtimes.

Hair & Beauty Salons

Salons with high card payment volumes use MCAs for:

• Salon refurbishments and equipment upgrades
• Hiring additional stylists during busy periods
• Marketing campaigns to attract new clients
• Stock purchases (products, tools, furniture)

Example: A beauty salon in Aberdeen needs £15,000 to refurbish and expand treatment rooms. An MCA provides funding within 48 hours, and repayments automatically adjust with appointment bookings.

Takeaways & Fast Food Businesses

Having run a Chinese buffet and takeaways for over 10 years myself, I know exactly how card payments have transformed the takeaway industry. What was once a predominantly cash business now sees 60-80% of transactions processed by card – especially with the rise of delivery apps and contactless payments.

Takeaways and fast food businesses with high card transaction volumes use MCAs for:

• Kitchen equipment replacement (ovens, fryers, refrigeration, extraction systems)
• Shop refurbishments to improve customer experience and meet food hygiene standards
• Technology upgrades (new tills, online ordering systems, digital menu boards)
• Stock purchases for busy periods
• Delivery vehicle purchases or repairs
• Marketing campaigns to attract new customers

Why MCAs suit takeaways: Your revenue fluctuates significantly – busy Friday and Saturday nights, quiet Mondays and Tuesdays, peak periods around holidays and events. Fixed loan payments during quiet periods can be difficult to manage. MCA repayments automatically reduce when sales drop, giving you the flexibility to manage cash flow during slower trading days.

Example: A takeaway in Dundee needs £30,000 to replace a broken commercial oven and upgrade the extraction system. An MCA provides funding within 48 hours, and repayments flex with daily card sales – higher during busy weekend evenings when orders are flooding in, lower during quiet weekday lunchtimes.

Important consideration: If you still process a significant amount of cash (30%+ of revenue), make sure your card transaction volume alone is sufficient to qualify (typically £5,000-£10,000+ per month in card sales). Some traditional takeaways with predominantly cash customers may be better suited to a business loan.

Hotels, B&Bs & Guest Houses

Hotels, B&Bs, and guest houses process almost all guest payments by card – room bookings, restaurant charges, bar tabs, and additional services. This makes them ideal candidates for merchant cash advances, particularly for seasonal tourism businesses.

Hotels and accommodation providers use MCAs for:

• Room refurbishments and upgrades to improve guest experience and online reviews
• Emergency repairs (boiler breakdowns, roof leaks, electrical issues)
• Furniture and fixture replacements
• Technology upgrades (booking systems, Wi-Fi infrastructure, smart room technology)
• Marketing campaigns to attract bookings during shoulder seasons
• Stock purchases for busy tourist seasons
• Expansion projects (additional rooms, function spaces, dining areas)

Why MCAs suit hotels: Tourism and hospitality businesses face extreme seasonal fluctuations. A hotel in the Scottish Highlands might be fully booked throughout summer (June-September) but struggle during winter months (November-March). MCA repayments automatically scale with occupancy – high repayments during peak season when you can afford them, minimal repayments during quiet months when cash flow is tight.

Example: A B&B in Edinburgh needs £50,000 to refurbish five guest rooms before the Edinburgh Festival season. An MCA provides funding in early July, and repayments automatically increasedduring the busy August festival period when the B&B wasfully booked at premium rates, then reducedsignificantly during the quiet winter months when occupancy drops.

Perfect timing for seasonal businesses: Apply for an MCA just before your peak season. You receive the funds to prepare (refurbishments, stock, marketing), then repay the bulk of the advance during your busiest, most profitable months. Repayments then naturally reduce during your quiet season, protecting your cash flow when you need it most.

Example: A hotel in the Scottish Highlands needs £75,000 for room refurbishments and marketing ahead of summer. An MCA in April provides the funds immediately. The hotel repays heavily during the busy summer months (June-September) when occupancy is 80-95%, then repayments automatically drop during the quiet winter months (November-March) when occupancy falls to 20-40%.

Key Point for Both Industries

Both takeaways and hotels benefit enormously from the flexible repayment structure of MCAs because:

✅ Revenue fluctuates significantly (daily for takeaways, seasonally for hotels)

✅ Most transactions are card payments (high qualification rates)

✅ Peak trading periods generate enough revenue to absorb higher repayments

✅ Quiet periods see automatic repayment reductions, protecting cash flow

✅ Emergency equipment needs require fast funding (24-48 hours)

However, the high cost of MCAs (20-50%+ APR equivalent) means they should only be used for:

• Emergency needs(broken equipment requiring immediate replacement)
• Short-term funding(6-12 months maximum)
• Opportunities with quick returns(refurbishments that immediately increase bookings/orders)

For non-urgent needs or longer-term funding, a traditional business loan will save you thousands in fees.

How Much Can I Borrow with a Merchant Cash Advance?

MCA amounts are based on your average monthly card sales:

Typical advance amounts: 1-3 times your average monthly card revenue

Minimum advance: £5,000 (some providers)

Maximum advance: £250,000 (most providers cap at £100,000-£150,000)

Most common: £10,000-£75,000

Examples:

Average monthly card sales: £10,000

• Typical advance available: £10,000-£30,000

Average monthly card sales: £25,000

• Typical advance available: £25,000-£75,000

Average monthly card sales: £50,000

• Typical advance available: £50,000-£150,000

Factors affecting advance amount:

• Average monthly card sales (last 3-6 months)
• Consistency of revenue (stable vs. highly variable)
• Trading history (longer = larger advances)
• Credit history (some adverse accepted, but affects amount)
• Existing MCAs or debts

How Much Do Merchant Cash Advances Cost?

Merchant cash advances are expensive. This is the most important thing to understand before proceeding.

Factor Rates Explained

MCAs use “factor rates” rather than APR. A factor rate is a multiplier applied to the advance amount to calculate total repayment.

Common factor rates: 1.2 to 1.5

What this means:

• Factor rate 1.2:Borrow £10,000, repay £12,000 (£2,000 fee = 20% of advance)
• Factor rate 1.3:Borrow £10,000, repay £13,000 (£3,000 fee = 30% of advance)
• Factor rate 1.4:Borrow £10,000, repay £14,000 (£4,000 fee = 40% of advance)
• Factor rate 1.5:Borrow £10,000, repay £15,000 (£5,000 fee = 50% of advance)

APR Equivalent

Factor rates are misleading because they don’t account for the repayment term. When converted to APR (which allows comparison with loans), MCAs typically cost 20-50%+ APR, sometimes much higher for short repayment periods.

Example:

• Advance:£20,000
• Factor rate:3
• Total repayable:£26,000
• Fee:£6,000
• Repayment term:12 months
• APR equivalent:Approximately 30-35% APR

Compare this to a business loan at 12% APR:

• Loan:£20,000
• Term:12 months
• Interest rate:12% APR
• Total repayable:£21,320
• Interest cost:£1,320

The MCA costs £4,680 more than a business loan for the same amount over the same term.

Real Cost Example: Small Advance

• Advance amount:£15,000
• Factor rate:25
• Total repayable:£18,750
• Total fee:£3,750
• Repayment percentage:15% of daily card sales
• Average daily card sales:£600
• Average daily repayment:£90
• Estimated repayment term:7-9 months
• APR equivalent:Approximately 35-40%

What you pay: £3,750 in fees to access £15,000 for approximately 8 months.

Real Cost Example: Larger Advance

• Advance amount:£50,000
• Factor rate:35
• Total repayable:£67,500
• Total fee:£17,500
• Repayment percentage:15% of daily card sales
• Average daily card sales:£2,000
• Average daily repayment:£300
• Estimated repayment term:8-10 months
• APR equivalent:Approximately 40-45%

What you pay: £17,500 in fees to access £50,000 for approximately 9 months.

Compare to a business loan:

• £50,000 loan at 12% APR over 12 months = £2,650 interest
• The MCA costs £14,850 more

Why Are MCAs So Expensive?

• Speed:Approval and funding within 24-48 hours (sometimes same-day)
• Flexibility:Repayments adjust with revenue – no fixed payments during slow periods
• Risk:Providers take higher risk (no security, flexible credit requirements)
• Regulation:Not FCA-regulated, so providers face fewer restrictions
• Short terms:Fees are compressed into 6-18 months rather than spread over 3-10 years

Am I Eligible for a Merchant Cash Advance?

Most businesses with card payment volumes qualify if you meet these criteria:

Minimum Requirements

• Trading history:At least 6-12 months (some providers accept 3 months)
• Monthly card sales:Minimum £5,000-£10,000 in card transactions per month
• UK-registered business:Limited company, sole trader, or partnership
• Business bank account:Active for at least 3-6 months
• Card payment processor:Worldpay, SumUp, Square, Zettle, or similar

You May Still Qualify Even If:

• You’re a relatively new business (under 2 years trading)
• You have some adverse credit (CCJs, defaults, missed payments)
• You’ve been declined by traditional lenders
• Your business has seasonal or fluctuating revenue
• You’re a sole trader or partnership (not just limited companies)

Typical Documentation Required

• Last 3-6 months business bank statements
• Last 3-6 months card processing statements (showing card sales volume)
• Personal ID (passport or driving licence)
• Proof of business address
• Details of existing debts and commitments

Not sure if you qualify? Contact us for a free assessment. We’ll review your card sales volume and let you know what advance amounts you’re likely to qualify for.

Benefits of Merchant Cash Advances

Flexible repayments – Repayments automatically adjust with your revenue. High sales = higher repayments. Low sales = lower repayments.

Very fast approval – Often approved and funded within 24-48 hours, sometimes same-day for urgent needs.

No fixed monthly payments – Never face a fixed payment you can’t afford during quiet trading periods.

More flexible credit requirements – Providers focus on card sales volume rather than credit scores.

No security required – Unsecured funding based on future card sales, not property or assets.

Suitable for seasonal businesses – Repayments naturally increase during busy seasons and decrease during quiet periods.

No early repayment penalties – Repay faster during busy periods without penalties (though total fee remains the same).

Quick access to repeat funding – Many providers offer “top-ups” before full repayment if business is performing well.

Drawbacks of Merchant Cash Advances

Very expensive – Factor rates of 1.2-1.5 equate to 20-50%+ APR, much higher than business loans (8-25% APR).

Reduces daily cash flow – 10-20% of every card sale goes to the provider, which can strain cash flow.

Not regulated by FCA – Less consumer protection than regulated loans.

Can create dependency – Some businesses get trapped in a cycle of taking new advances to repay old ones.

Shorter terms – Typically 6-18 months, meaning fees are compressed into a short period.

Only works for card-heavy businesses – If most revenue is cash, invoices, or bank transfers, MCAs aren’t suitable.

Can affect future borrowing – Taking an MCA may make it harder to get traditional loans later.

Merchant Cash Advance Providers We Work With

We’re not tied to any single provider. I have access to:

• Liberis– One of the UK’s largest MCA providers, integrated with major card processors
• Payl8r– Specialist in retail and hospitality MCAs
• YouLend– Fast approval, flexible terms, integrated with major payment processors
• iwoca– Offers both MCAs and traditional business loans (we’ll recommend the cheapest option)
• Kriya– Alternative finance provider with flexible revenue-based products
• Capify– Specialist in merchant cash advances for retail and service businesses
• Funding Circle– Offers revenue-based finance alongside traditional loans

This means I can compare factor rates, repayment percentages, and terms across multiple providers to find you the best deal – and I’ll always tell you if a traditional business loan would be cheaper.

Why Choose Capital 8 Finance?

I’ll Tell You If an MCA Is the Wrong Choice

If a business loan, invoice finance, or another product is cheaper and more suitable, I’ll tell you.

My priority is finding you the most cost-effective funding solution, not the most profitable one for me.

I Understand Hospitality & Seasonal Cash Flow

Having run a hospitality business for over 10 years, I genuinely understand when flexible repayments are worth the extra cost, and when they’re not. I’ve faced the challenge of fixed loan payments during quiet January trading – I know how valuable flexibility can be.

This experience means I can give you practical, honest advice based on real-world business ownership, not just theory.

Scotland-Based, UK-Wide Service

Based in Dundee, I serve businesses across Scotland and throughout the UK. I understand the unique challenges of Scottish businesses and have completed funding cases across all regions.

Fast, Personal Service

As a solo operator, you deal directly with me throughout the entire process. I’ll respond to your enquiry within 24 hours, provide you with options within 48 hours, and keep you updated at every stage.

Whole-of-Market Access

I’m not tied to any single MCA provider, which means I can find you the best factor rates and terms from multiple providers – including providers you wouldn’t find on your own.

How to Apply for a Merchant Cash Advance

Here’s what happens next:

1. Initial consultation– We’ll discuss your funding needs, card sales volume, and whether an MCA is the right choice (call or video meeting, 15-30 minutes). I’ll also explain if a cheaper alternative is available.
2. Options provided– Within 24-48 hours, I’ll provide you with MCA options, factor rates, repayment percentages, and estimated costs from suitable providers.
3. Documentation submitted– Once you choose a provider, I’ll help you gather the required documents (bank statements, card processing statements, ID).
4. Application submitted– I’ll submit your application and liaise with the provider on your behalf.
5. Approval & funding– Most MCAs are approved and funded within 24-48 hours, sometimes same-day for urgent needs.

Ready to explore your merchant cash advance options? Contact Capital 8 Finance today for your free consultation – and I’ll give you an honest assessment of whether an MCA is the right choice for your business.

Frequently Asked Questions

What’s the difference between a merchant cash advance and a business loan?

An MCA repays through a percentage of daily card sales (flexible), while a business loan has fixed monthly payments. MCAs are much more expensive (20-50%+ APR equivalent vs. 8-25% APR for loans) but offer flexibility for businesses with fluctuating revenue.

How quickly can I get a merchant cash advance?

Very fast – typically approved and funded within 24-48 hours. Some providers offer same-day funding for urgent needs.

Can I get an MCA with bad credit?

Possibly. MCA providers focus more on your card sales volume than credit scores, though they will check credit history. Some adverse credit is often accepted, but may affect the factor rate and advance amount.

What happens if my card sales drop significantly?

Your repayments automatically reduce. If you have £500 in card sales instead of your usual £2,000, you only repay 15% of £500 (£75) instead of 15% of £2,000 (£300). This is the main benefit of MCAs.

Can I repay an MCA early?

Yes, there are no early repayment penalties. However, the total fee remains the same regardless of how quickly you repay – you don’t save money by repaying early (unlike loans where you save interest).

Do I need to provide a personal guarantee?

Most MCA providers require a personal guarantee, which means you’re personally liable if the business can’t repay. We’ll explain all guarantee requirements before you proceed.

What percentage of my card sales will be taken?

Typically 10-20%, depending on the provider, advance amount, and your sales volume. Higher percentages mean faster repayment but greater impact on daily cash flow.

Can I get an MCA if most of my revenue is cash or invoices?

No. MCAs only work for businesses with significant card payment volumes (typically £5,000-£10,000+ per month in card sales). If most of your revenue is cash, bank transfers, or invoices, consider a business loan or invoice finance instead.

How long does it take to repay an MCA?

Typically 6-18 months, but this varies significantly based on your card sales volume. Higher sales = faster repayment. Lower sales = slower repayment. The provider takes the agreed percentage until the total amount is repaid.

Can I have multiple MCAs at the same time?

Some providers allow this, but it’s generally not advisable. Multiple MCAs taking percentages of your card sales can severely strain cash flow. Most providers won’t offer a second advance until the first is substantially repaid.

Are merchant cash advances regulated?

No. MCAs are not regulated by the Financial Conduct Authority (FCA) because they’re technically not loans – they’re purchases of future receivables. This means less consumer protection than regulated business loans.

What’s a factor rate?

A factor rate is a multiplier applied to the advance amount to calculate total repayment. Factor rate 1.3 means you repay £1.30 for every £1.00 borrowed. So a £10,000 advance at factor rate 1.3 means you repay £13,000 total.

Is an MCA tax deductible?

The fees paid on an MCA are generally tax-deductible as a business expense, similar to loan interest. Consult your accountant for specific tax advice.

What happens if I can’t repay?

Because repayments are a percentage of card sales, you can’t technically “miss” a payment – if you have no card sales, you repay nothing that day. However, if your business closes or card sales stop entirely, you’re still liable for the outstanding balance via the personal guarantee.

Should I choose an MCA or a business loan?

Choose an MCA if: You need funding within 24-48 hours, have fluctuating revenue, and need short-term funding (under 18 months). The flexibility is worth the extra cost.

Choose a business loan if: You can wait 1-2 weeks, have steady revenue, and want the lowest cost. Loans are significantly cheaper (often £5,000-£15,000 less in fees for the same amount).