What is a merchant cash advance?

A merchant cash advance is a single transaction broken into five moving parts. You apply, the lender reads your card data, you get an offer, you accept, and repayment starts the moment your next card sale clears. There's no chequebook, no standing order, no calendar reminder.

1. Apply. 60 seconds online, sector, monthly card takings, amount needed.
2. Lender review. Lenders pull or receive 6 to 12 months of your card processor statements (Dojo, Square, Zettle, Stripe, SumUp, PDQ, most are supported). They look primarily at trading volume and consistency, less at your personal credit file.
3. Offer. You receive an advance amount, a fixed cost (the multiplier on what you repay) and a daily repayment % (the percentage of each card sale that goes to repayment).
4. Accept & fund. Funds typically arrive within 24 hours of acceptance.
5. Auto-repayment. The agreed daily repayment % comes off each day's card takings until the total repayable amount is cleared. No invoices to chase, nothing to remember.

Because repayment is a percentage of takings, slow weeks repay less and busy weeks repay more. The cadence flexes with your business, not against it.

An MCA isn't a loan in the traditional sense. Legally and mechanically, it's a purchase of future receivables: the lender buys a slice of your future card takings at a discount today. That sounds like hair-splitting, but it changes nearly everything about how the product behaves.

• No fixed monthly repayment. A term loan asks for £X on the first of every month, regardless of how your week went. MCA only takes when you take.
• No fixed term. A term loan ends on a calendar date. MCA ends when the total repayable amount has been collected, which moves with your trading.
• No interest. There's a single factor rate applied at outset. The cost is fixed in absolute pounds from day one.
• Different regulatory treatment. MCA is commercial finance, see Is it regulated? below.

For a deeper side-by-side, see MCA vs business loan.

Cost on an MCA is expressed as a fixed cost a single multiplier applied to the advance amount. If you borrow £10,000 at a fixed cost of 1.25, you repay £12,500 in total. The £2,500 difference is the entire cost. There's no interest accruing daily, no late-payment ladder, no early repayment penalty on most facilities.

Looked at on its own, a 1.25 fixed cost sounds modest 25% on top of what you borrowed. But UK MCA terms are short: 6 to 12 months is typical, occasionally faster. That £2,500 cost gets paid back inside a year, not spread over five. Compared to a multi-year term loan, that's a meaningfully more expensive way to borrow.

For a calculator that does the maths for you, see the fixed cost calculatorand for the deeper detail on what moves the rate see how fixed costs are set.

The daily repayment % is the percentage of each day's card takings that goes to repayment. Typical UK MCA daily repayment %s sit between 10% and 20%. On £1,000 of card sales today with a 12% daily repayment, £120 is collected toward repayment and £880 settles to your bank as normal.

Daily repayment % is a trade-off. A higher daily repayment % shortens the term (you clear the total repayable faster) but takes more out of daily cash flow. A lower daily repayment % eases daily cash flow but extends the term, which doesn't change the total cost on most facilities, because the fixed cost is fixed.

Lenders set the daily repayment % based on your trading profile and the advance size. If your card volume is volatile, expect a lower daily repayment %. If it's steady, the daily repayment % can be higher without straining cash flow.

Most UK MCAs clear in 3 to 18 months. There's no calendar deadline, the facility ends when the agreed total repayable amount has been collected through the daily repayment % mechanism.

That means a quiet trading period extends the term but doesn't add cost. A busy period shortens the term, and on most facilities you've still paid the same total. Some lenders offer a small discount for very early repayment; we'll flag those quotes.

The bar is reasonable rather than punitive, MCA was built for businesses that are trading well but might struggle with a bank loan. The standard checklist is:

• 6 to 12 months of card trading history with a recognised UK card processor is enough to be assessed.
• Average card takings of at least £2,500/month. Most lenders prefer £5,000+ for a meaningful advance.
• A UK-registered business. Sole traders, partnerships, LLPs and limited companies all qualify. Charities and non-profits are usually excluded.
• A director's personal guarantee on most facilities. The advance itself is unsecured against business assets, but the guarantee is standard.

Personal credit matters less than card trading volume, but isn't ignored, see MCA with bad credit.

MCA earns its place in five clear scenarios:

• Seasonal smoothing. Stock-up before peak, repay through peak takings.
• Growth capital ahead of peak. Marketing, inventory, hires that pay back through the trading they enable.
• Imperfect credit but strong trading. Personal score doesn't qualify for a high-street loan, but card data shows a healthy business.
• Speed. 24-hour decisions and same-day funding where banks would take weeks.
• Strong revenue with thin paper accounts. Newer businesses or limited-history filings, card data is worth more here than statutory accounts.

MCA is the wrong tool more often than brokers will admit. We tell you when:

• One-off large equipment purchases. Asset finance is almost always cheaper because the kit itself is the security.
• Predictable cash flow with clean credit. A term loan will quote a lower cost-of-capital and a kinder repayment profile.
• Low card volume. If most takings are cash or direct debit, the MCA mechanic doesn't fit and the advance amount won't be useful.
• Punitive fixed costs on short terms. A fixed cost above 1.35 repaid in under 4 months is rarely justifiable, there's usually a better instrument.

No. Merchant cash advance is commercial finance arranged between businesses, and it is not regulated by the Financial Conduct Authority. Because the legal structure is a purchase of future receivables rather than a loan, it sits outside consumer credit protections. The Financial Ombudsman Service does not have jurisdiction over MCA disputes.

Merchant Business Loans is a commercial finance broker. We are registered with the Information Commissioner's Office for data handling. If a consumer credit facility matters to you, ask us about a term loan via Funding Flow.

Three sensible next steps depending on how far down the path you are:

• Not sure if MCA fits. Take the 60-second quiz.
• Want to model the cost. Use the fixed cost calculator to see total repayable, monthly cost and estimated term on your numbers.
• Ready for a quote. Quick Apply, 60 seconds, soft search, no commitment.

Or speak to Flo, our chat agent, open it from the bottom-right of any page on the site.