- A merchant cash advance is a business funding option where a percentage of card sales made by a business helps to repay the loan.
- To be eligible a business must generate £1,000 in monthly sales; have been trading for three months, the business must be based in the UK; the business owner is over 18 years old.
- Businesses can borrow up to £200,000 with a merchant cash advance.
- The application for a business cash advance is online only and takes minutes to complete. Successful applicants can be approved for funding within 24 hours.
What is a merchant cash advance?
A merchant cash advance is a form of business funding that lets businesses borrow money against their future card sales. Rather than interest, a business pays an upfront fee when they take out the loan.
How does a merchant cash advance work?
The merchant cash advance is a funding option where a business borrows money and repays the borrowed money with an agreed percentage of their debit or credit card sales This includes purchases made either by a physical card machine or card transactions made online.
For example, every time a customer purchases a product using their debit or credit card using the dedicated card terminal, a small percentage of that payment goes to the lender which helps to repay the loan. This process continues until the loan is fully repaid.
A merchant cash advance does not charge any interest on the amount borrowed. Instead, an upfront fee is paid to the lender which replaces the need for any interest. For instance, if a business borrows £50,000, it may be charged an upfront fee of 10% bringing the total cost of the loan to £55,000.
How can I apply for a merchant cash advance?
Business owners looking to apply for a merchant cash advance can do so by applying online at the For Kredit website. The online application requires some basic information about the applicant and the business. Successful applicants can be approved for funding within 24 hours with the loan amount transferred into the business’ bank account in minutes once the deal is finalised.
How much can I apply for with a merchant cash advance?
Business owners that apply for a merchant cash advance can choose to borrow any amount between £1,000 – £200,000 with For Kredit. The amount borrowed is subject to approval by the lender, which means the final amount offered may be different from the initial amount that was applied for.
Is my business eligible for a merchant cash advance?
Unlike unsecured funding, there are a few more specialist eligibility requirements that a business must meet to be deemed eligible for a cash advance. To qualify for a merchant cash advance the business must meet the following criteria:
- The business must have been trading for at least three months.
- The business must receive over £1,000 in monthly card sales.
- The business is based in the UK.
- The owner of the business is over 18 years of age.
What are the repayment terms of a merchant cash advance?
With a merchant cash advance, the loan is repaid with a percentage of your future card credit sales. The percentage of the card sales that is dedicated to repaying the loan is pre-agreed with the lender.
The repayments are made monthly, so a business repays more in busier months and pays less during slower months. There are no interest rates with a merchant cash advance that need to be repaid.
Do I have to sign a personal guarantee when I apply for a merchant cash advance?
Yes, as a merchant cash advance still qualifies as an unsecured form of funding, the director/owner of the business will be required to sign a personal guarantee. The personal guarantee legally ensures that if the business fails to operate and closes down, any outstanding debt is personally repaid by the guarantor. This helps minimise the risk to the lender and ensures that they receive the money that they are owed.
If I have a bad credit rating, will it impact my application for a business cash advance?
The credit score of an applicant does have the potential to affect an application. It may mean that less money is offered to the applicant as part of the loan.
However, the structure of a cash advance is that it heavily relies on the performance of a business. Therefore, how the business performs is a large factor in determining whether an applicant will be offered a cash advance.
Why do businesses apply for a merchant cash advance?
Flexible repayment process
One of the attractive and distinctive features of the merchant cash advance is that the repayment of the loan mirrors how the business performs. This means that when a business is having a really good month and makes lots of sales, the business repays more of the loan back. When the business is having a slower month of sales less is paid back, but the loan is still being repaid in the process.
This is more flexible than rigid fixed monthly payments that must be met every month despite how the business performs.
Useful for businesses that make card sales
For businesses that generate their revenue primarily through card sales, a merchant cash advance is a really useful funding option. It allows the business to borrow money without having to make any major adjustments to their business
Choose how your business uses the money
A benefit of the advance is that you get to choose how you spend the money in your business. There are a number of ways a business may use the money, such as investment, hiring new staff, marketing, and growing the business – the list really goes on and depends on your needs.
What other funding options are available for small businesses?
A merchant cash advance may not be suited to every business, that’s why at For Kredit we also provide a number of different unsecured funding options for businesses looking to raise credit.
How much money can I apply for with a merchant cash advance?
With a merchant cash advance, a business can choose to apply for funding between £1,000 – £200,000 to help their business.
How can I apply for a working capital loan?
Businesses can apply for a merchant cash advance by using the online application at the For Kredit website. The application is completely online so no paperwork is required. Applicants need to provide some basic details about themselves and their businesses. Successful applicants can be approved for funding within as little as 24 hours.
How long do I have to repay the working capital loan?
As the repayment process of the merchant cash advance is based on sales, it is ultimately down to the performance of the business which determines how quickly the loan is repaid. A business which is consistently performing well will pay the loan off faster than a business that has had a couple of slow months of trading.