What is a merchant cash advance?
A merchant cash advance (MCA) is a lump sum, usually £5,000 to £1,000,000, repaid automatically through a fixed percentage of your daily card sales. There is no fixed monthly payment: repay more on busy days, less on quiet ones. The total cost is set upfront by a factor rate, typically 1.1x to 1.25x.
How does it work? A real example
We place MCA deals through YouLend, 365 Finance, Capify and others most weeks, so here is the shape of a typical one. A restaurant client of ours taking around £40k a month in card payments wanted £50,000 for a kitchen refit. This is how the numbers worked.
Restaurant taking £50,000
You receive
£50,000 in your bank account, usually 1 to 2 days after approval
Total repayment agreed upfront
£50,000 × 1.1 factor rate = £55,000 total, so the funding costs £5,000
Daily repayment
10% of each card transaction is deducted automatically at settlement
Fully repaid
Typically 10 to 14 months depending on sales. No fixed monthly payment to find in a quiet month.
Where an MCA wins, and what it costs
Where it wins
- • Decision in 24 to 48 hours, against 4 to 12 weeks for a bank loan
- • Approval leans on card sales, not just your credit file
- • Repayments flex with your takings, which suits seasonal trade
- • Weaker credit is workable, priced through the factor rate
- • £5,000 to £1,000,000 through our lender panel
The catch
- Factor rate: 1.1x to 1.25x depending on your profile
- Example: take £50k at 1.1x, repay £55k
- Cost per pound is higher than a good bank loan. If you can wait 8 weeks and your credit is clean, a term loan is usually cheaper
- Unregulated: an MCA for a limited company is a commercial agreement outside FCA regulation, so check the terms carefully
Honestly, don't bother with an MCA if under 30% of your revenue comes through card payments. The repayment mechanism needs card volume to work, and lenders will either decline or offer far less than you want. Invoice finance or a term loan tends to fit better in that case.
Who qualifies?
What lenders on our panel typically want:
Declined by the bank? In our experience that often says little about your MCA chances, because MCA underwriting weighs card sales far more heavily than credit history. We currently work with limited companies and LLPs only.
Common questions, quick answers
Is a merchant cash advance a loan?
No. Legally it is a purchase of your future card receivables, not a loan. That is also why it is not regulated by the FCA for limited companies. Approval decisions lean on your card sales rather than your credit file.
How much can I get with an MCA?
Typically £5,000 to £1,000,000, and usually 1 to 2 times your average monthly card sales. A restaurant taking £40k a month in card payments could realistically access £40k to £80k.
How long does approval take?
Usually 24 to 48 hours. We have seen approvals in as little as 6 hours for straightforward cases. Funds tend to arrive 1 to 2 days after approval.
What if I have bad credit?
You can still qualify in many cases. Weaker credit usually means a higher factor rate, closer to 1.2 to 1.25x rather than 1.1x, because lenders price for the extra risk. Card sales history carries more weight than your credit score.
Is a merchant cash advance regulated?
No. An MCA taken by a limited company is an unregulated commercial agreement, so FCA consumer protections do not apply. Read the agreement carefully and make sure the repayment percentage works for your margins before you sign.
See where you'd fit
Tell us your card sales and trading history. We'll tell you which lenders on our panel are realistic, usually within 24 hours.
Start the 2 minute formSources and references
- FCA: merchant cash advance and unregulated commercial lending
- British Business Bank: business finance explained
- Gov.uk: business finance and support
- UK Finance: business finance data
- YouLend: how revenue-based funding works
- 365 Finance: merchant cash advance
- iwoca: flexible business loans
- Companies House: CapExpand Ltd 14433858
CapExpand Ltd (Company No. 14433858) is a commercial finance introducer, not a lender. We are not currently authorised or regulated by the Financial Conduct Authority and do not provide financial advice. All information on this page is for educational purposes only. Funding is subject to status and lender criteria. CapExpand will receive a commission from providers at no extra cost to you.