Benefits of a merchant cash advance
Key benefits of merchant cash advances include:
- Rapid approval and funding
- No fixed monthly payments
- Repayments are based on a percentage of sales made, meaning less is repaid when sales are slower
- Available to businesses with weaker credit
- Can be Shariah-compliant
- Available to young businesses with at least 4 months’ trading activity
- Funds can be used for almost any purpose
- Well suited to e-commerce businesses and other B2C businesses that take a large number of sales through card terminals or online payments.
Merchant cash advances are often set up with a variable repayment, which means you pay them back in line with your sales activity. If sales are slow or you are in a seasonally quieter period, you won’t pay the facility back as quickly, putting less pressure on your cashflow at these critical times.
What is a merchant cash advance?
Merchant cash advances are a form of alternative finance that allows businesses to borrow money based on their future credit and debit card sales.
They provide businesses with quick access to cash, flexible repayment terms, and no requirement for collateral or a good credit score. They are a great option for businesses that need cash quickly or may not qualify for traditional loans. They can, however, be more expensive than other forms of financing, so businesses should carefully consider the costs before taking out a merchant cash advance.
How does a merchant cash advance work?
The merchant cash advance process would typically be as follows:
- Initial review: You would provide us with a copy of your business’ bank statements and merchant statements from your card acquirer – the company you take payments through, e.g. Stripe.
- Credit assessment: The lender evaluates the application we put forward and determines the amount that can be advanced based on your business’ credit profile and monthly sales activity via your card terminals and/or e-commerce platforms. Generally, lenders will advance up to twice your average monthly sales.
- Funding: The lender will deposit funds straight into your business bank account as a revenue advance.
- Repayment: Repayments are generally made by repaying a fixed percentage of each future credit and debit card sale until the cash advance is paid back in full. This fixed percentage is known as a “split”, and it can range from 5% to 20% depending on the lender and your sales volume and credit profile.
