Merchant Cash Advance
A Merchant Cash Advance (MCA) is a loan in the form of a lump sum in exchange for a percentage of daily credit card sales, repaid by automatic deductions until the advance, along with a fee, is fully paid.
Key Facts
-
It’s different from a conventional business loan as it’s repaid by future card payments taken by the client.
-
Instead of the lender taking a fixed sum each month, up to 20% is deducted from each card payment the client takes which goes towards repaying the loan (known as the ‘sweep’).
How It Works?
-
The lender will review the businesses card payments.
-
A loan will be paid in a lump sum to the borrower.
-
Every card payment the borrower takes, a % will be paid directly to the lender. This will be paying off the loan (and a fee).
-
As payments are made as a percentage of money received by the business, repayments will increase during busier seasons and decrease in quieter periods.
Notices
-
During busy periods the client will effectively pay off the loan quicker and during quieter times, repay less.
-
Works in accordance with clients’ cashflow.
-
An MCA is only applicable to B2C businesses who take card payments.
Why May I Need It?
-
Business regularly receives card payments.
-
The business may be seasonal; i.e. have peaks in the summer or winter periods.
-
Cash flow difficulties.
Popular Industries
Retailers
Retail business facing cash flow challenges during a slow season may opt for a Merchant Cash Advance (MCA). This allows the retailer to quickly access funds, with repayments linked to daily credit card sales.