How do merchant cash advances work?
In much the same way as a loan, a lump sum is paid into your bank at the start of the agreement. Whereas with a loan, you would make monthly repayments to pay off your loan, a merchant cash advance is repaid daily.
The daily repayments are taken automatically as a percentage of your card terminal receipts. The percentage taken is agreed upfront and is usually between 10-20% of the amount taken.
As the repayments are based on a percentage of takings rather than a set payment, you repay more when card receipts are up and less during quieter times. This can make managing cash flow much easier, especially as you don’t have to find a large lump sum each month.
How could a business cash advance benefit my business?
Business cash advances are used to aid cash flow, purchase stock or fund business growth. If your company needs a capital injection, a merchant cash advance could be ideal. Of course, before proceeding, it’s important that you consider any alternatives – we cover the basics later in this article.
This option can usually be completed quickly, meaning you can react quickly to any unexpected expenses or opportunities. The improvement in cash flow can often lead to an increase in profit for the borrower.
The flexibility offered through business cash advances is often highly beneficial to owners. The usual strain of finance costs during quieter periods is no longer a problem with your agreed repayments always staying in line with cash flow.
You keep all of your non-card income, meaning you don’t have to make any payments on top of the agreed card payments.
How much can I borrow?
Business cash advances are available between £2,500 and £300,000, with the amount depending on your needs and circumstances.
We are usually able to confirm your maximum borrowing capacity within one hour of your initial conversation with one of our business finance experts.
How much will it cost?
Merchant cash advances are generally offered with an agreed repayment amount upfront, for instance, an advance of £20,000 could have an agreed repayment of £24,000. The amount of time taken to repay the money is less clear, with repayments linked to your revenue.
This can make an APR comparison slightly tricky but is counterbalanced by the certainty of cost upfront.
Repayments are generally set as a fixed percentage of revenue through PDQ terminal (card terminal) payments, meaning use of PDQ systems is crucial for raising this type of finance.
How quickly can I draw down funds?
Business cash advances tend to complete very quickly, meaning they are ideal for when your business needs money in a hurry. They are fast becoming a very popular form of finance in the UK, helping thousands of UK businesses already.