In the UK, businesses of all sizes often need cash to buy stock but may not have enough available funds. This is where a Merchant Cash Advance (MCA) can help by providing instant cash to support business growth.
In this article, we will guide you through:
- What a Merchant Cash Advance is
- How a Merchant Cash Advance works
- The procedure to obtain one
- Where to get a Merchant Cash Advance in the UK
- And much more…
Let’s get started!
What is a merchant cash advance?
A Merchant Cash Advance (MCA) allows businesses to get money quickly. Instead of a regular loan, where you pay a set amount every month, with an MCA, you get cash upfront. Then, you pay it back bit by bit, based on your daily or weekly sales. The more you sell, the more you pay back. If sales are slow, your payments are smaller. It’s easier to get because it doesn’t depend on your credit score but on how much your business sells.
What Does It Mean to Pay Through Daily or Weekly Sales?
When you take a Merchant Cash Advance (MCA), you pay it back based on your sales. Instead of paying the same amount every month, the lender takes a small part of what you earn each day or week.
- If you sell a lot that day or week, you pay a bit more.
- If you sell less, you pay less.
So, your payments adjust automatically depending on how well your business is doing. This makes it easier to manage because you don’t have to worry about paying a fixed amount when sales are slow.
How Does a Merchant Cash Advance Work?
A Merchant Cash Advance (MCA) works by providing a business with quick cash upfront in exchange for a percentage of its future sales. Here’s how the process works:
- Apply: You request a cash advance from a provider, who looks at your daily or monthly sales.
- Get Cash: If approved, you receive a lump sum of money immediately.
- Repay: You repay the advance with a small percentage of your daily or weekly sales. Payments vary depending on how much you earn.
- Automatic Deductions: The repayment is automatically deducted from your sales, so you don’t have to manage payments manually.
Where to Get a Merchant Cash Advance in the UK?
There are many lenders and brokers are there who can help you to get MCA within a short period but when you choose lenders you must see the factor rate and repayment terms and their support. Paymentsave can help you to get Merchant cash advances in the UK within a short time.
Here the more options to get merchant cash advance for your business:
- Specialized Providers: Look for companies that offer Merchant Cash Advances specifically, such as Liberis or Funding Circle. They specialize in this type of funding.
- Alternative Lenders: Companies like Growth Street offer MCAs along with other business loans.
What is the factor rate in MCA?
The factor rate is important because it shows you how much extra you’ll pay back on top of what you borrowed. It’s a simple multiplier: for example, if your factor rate is 1.3 and you borrow £10,000, you’ll pay back £13,000 in total. This helps you see the full cost of the advance easily. It also lets you compare different offers—lower factor rates mean you pay less overall. Knowing this helps you plan your budget and manage your cash flow better.
How is a Merchant Cash Advance Calculated?
A Merchant Cash Advance (MCA) is calculated using a factor rate, which helps determine the total amount you will repay. The factor rate is a multiplier that shows how much extra you will pay beyond the amount you borrowed. For example, if the factor rate is 1.3, it means you’ll repay 30% more than the borrowed amount.
To calculate the total repayment, you simply multiply the amount you borrowed by the factor rate. For instance, if you borrow £10,000 and the factor rate is 1.3, your total repayment will be £13,000.
Repayments are flexible and based on your daily or weekly sales. This means the amount you pay back adjusts depending on how much money you make.
Is a Merchant Cash Advance a Good Idea?
A Merchant Cash Advance can be a good idea if you need quick cash and have strong sales. It’s flexible and doesn’t require a high credit score. However, it can be expensive due to high factor rates, so it’s best if you’re sure you can handle the repayments.
How Does a Merchant Cash Advance Work?
You get a lump sum of cash now and pay it back with a percentage of your daily or weekly sales. Payments adjust based on your sales, so if you make more money, you pay back more; if you make less, you pay back less.
How is a Merchant Cash Advance Calculated?
The total repayment amount is calculated using a factor rate. For example, if you borrow £10,000 and the factor rate is 1.3, you’ll pay back £13,000 in total.
Can a Merchant Cash Advance Hurt Your Credit?
No, a Merchant Cash Advance typically doesn’t impact your credit score because it’s based on your sales, not your credit history. However, failing to repay it on time can indirectly affect your credit if it leads to financial problems.