All Your Questions Answered:
What Is A Business Cash Advance?
A business cash advance, or a merchant cash advance as it's also known, is an innovative business loan alternative. It operates on a business-to-business basis and offers quick access to capital ranging from £5,000 to £200,000. It is a relatively new business finance solution, but the demand for it is increasing greatly amongst the UK's SMEs - and for good reason too.
Why Is It Becoming Popular?
- It's the fastest way to fund a business - you can access cash far faster than you can with a traditional bank loan.
- There is no interest - you are not charged any interest on the amount you borrow. Instead, you agree on a fixed fee upfront with the lender so you'll know exactly what you have to pay back.
- Repayments are always flexible - the amount you pay back each month is nicely in sync with your business' performance, so if you earn less one day, you'll also repay less.
- It's simple and easy to obtain - applications are made 100% online and decisions are delivered within minutes.
How Does It Work?
Put simply, a lender will give you an instant cash-injection of up to £200,000, which you then pay back using a small percentage of your future card sales. The percentage that you repay is always agreed upfront and you get to keep 100% of your cash sales!
The amount you receive will depend on how much revenue your business generates in card transactions each month. As a minimum, you'll need to be making an average of £5,000 per month to qualify. So, if your business is achieving a good volume of credit card sales, but has a shortage of spare cash, an advance is a fantastic means of acquiring the extra funds your business needs to grow.
See How It Works In Less Than 60 Seconds
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The Application Process Applying For A Merchant Cash Advance
A cash advance is a fantastic alternative to traditional business funding. It's simple, fast and flexible. But how do you get one and how does it work? In this section we explain the whole process, from start to finish, in 6 simple steps:
Step 1 – Apply Online
Get started and submit an online application form. The form is short, straight-forward and takes just minutes to complete. With alternative business funding, there's no need to attend a meeting with the bank or make any calls. Simply apply from the comfort of your own home. Read More »
In your application you'll need to include:
- The amount you want to borrow
- An average total of your monthly card sales
- Details of your current card processor
- Your age - you'll need to be 18 or above to qualify « Show Less
Why Choose Us: With Merchant Cash Express, you'll never have to wait for a decision. We'll let you know if you've been approved within just minutes of applying.
Step 2 - Provide Relevant Documentation
Next, the lender may ask you to provide further supporting documentation to validate the information given in your application. This can include:
- Evidence of UK citizenship (a British passport or an original copy of your birth certificate)
- 3-6 months' worth of bank statements for your business
- 3-6 months' worth of card receipts
Step 3 – Receive A Decision
Once everything has been reviewed, you'll receive an offer. This offer will include 3 important pieces of information:
- The loan amount
- The fee that you'll be charged
- The percentage of future card sales that you'll have to repay
In some cases, you may also be asked to switch card processors to one which the lender prefers. The process to switch is fairly straightforward, so it shouldn't delay the time it takes to receive your capital.
Top Tip: Always ensure that the cash advance provider you're considering is legitimate. Trustworthy lenders are registered with the FCA, so double-check their online register for you desired lender before making an application for business finance.
Step 4 – Ensure That You're Happy With The Terms
Don't feel scared to ask questions if you need the terms clarifying further. Just as the lender may need extra information to decide if you're a suitable candidate, you might require additional information to check that they're an appropriate lender.
If you're not happy with the terms of the offer at this stage, there's absolutely no obligation to continue, so don't worry. Once you are entirely confident that this is right for you, go ahead and accept!
Step 5 – Receive The Money
As soon as you accept the offer, the lender will start to transfer the capital direct to your business' account. You can expect to receive the funds within as little as 48 hours! There you have it, instant access to the cash your business needs - it really is as simple as that.
Step 6 – Start Making Repayments
The lender will work directly with your card processor to automatically withhold a small, pre-agreed percentage of your daily debit card and credit card sales (typically, this is set at between 5-17%). This will continue each day until the loan amount is repaid in full, plus one all-inclusive fee.
There is no fixed repayment period, but in general, the majority of businesses are able to comfortably repay the entire amount within just 4-18 months. Read More »
What Are The Perks Of Merchant Cash Advance Repayments?
There are no fixed repayments, just flexible repayments. You repay a percentage, not a fixed figure sum, so the amount that you pay back is always relative to how much your business earns that day.
For example, if you have a slower day and make less money, you also repay less. Better still, on a good business day, you can repay more and pay off the loan amount even quicker than you originally thought. This all helps to minimise financial strain and there's no unnecessary pressure on your business to repay.
There you have it, a detailed step-by-step guide to securing an immediate cash advance. Now all you need to do is go ahead and apply! « Show Less
What Are The Benefits & Drawbacks? The Pros & Cons Of Business Cash Advances
Before applying for any form of finance, you need to ensure that you're aware of all the potential positives and negatives of the product in question. This way, the decision that you make will be well-informed and appropriately thought out. In this section we'll consider both the benefits and the drawbacks of cash advances side-by-side:
What Are The Benefits Of A Cash Advance?
1. The Application Process Is Simple
You can make an application for an advance just by going online. No paperwork and no calls, just one short, online form. You can apply on the go, via your phone, or from the comfort of your own home. Read More »
It's great if you're a busy business owner, because you won't have to waste time scheduling and attending meetings with the bank. A quick and effortless application all helps to speed up the process and get you the fast cash your business needs. « Show Less
2. It's Easy To Qualify (Even If You Have Bad Credit)
You don't need a perfect credit score to qualify, because you're assessed according to the volume of card sales your business processes each month. Providing that you make a good revenue from your customer card transactions (£5,000 a month minimum) an imperfect credit rating should not affect your application. Lenders for merchant cash advances are interested in card transactions, not credit ratings!
Top Tip: If you're concerned about being rejected for alternative business funding, you can check your chances of qualifying before applying, using soft search results. Doing this will not affect your credit score and you can do it for free using Experian.
3. Access Funding Quickly
With a business cash advance, you can access capital in as little as 48 hours! Decisions are delivered in minutes and approval rates are very high. As soon as you've accepted the terms of the offer, the lender will transfer the money direct to your account. Read More »
If you opt for a traditional business loan you won't have access to funds this quickly. You could be left waiting weeks, even months, just to receive a decision, let alone the capital. « Show Less
4. It's An Affordable Way To Borrow
There are no hidden fees or late repayment charges. The terms are straight forward – you receive on lump-sum payment and have just one clear cost to repay.
There's also no pressure to repay the amount faster than your business can afford. The amount you repay directly corresponds with the amount your business earns. If you earn less, the amount you repay will also be less, so financial stress is always kept to a minimum.
Why Choose Us: We're approved by the Financial Conduct Authority which means we're a fully authorised and legitimate organisation. Better still, we use 256 bit technology to ensure that all of our client's applications are 100% safe and secure.
5. It's The Safest Way To Fund A Business
A real plus-point of this type of business funding is that it is entirely unsecured. Ultimately, there's no need to provide collateral and no personal obligation. You can effectively invest in your business' future without having to risk your home. Read More »
There are also no nasty surprises. The terms of the agreement are agreed upfront prior to the exchange of funds, so you will always be given the opportunity to clarify anything you're unsure about. You'll never enter an agreement blindly and you'll never be pressured into anything you're uncomfortable with. « Show Less
What Are The Drawbacks?
1. Terms Can Affect How Your Run Your Business
Loan providers will always request that you agree to their terms before you receive any capital. These terms can, in some cases, place small restrictions on the way you run your business, such as: Read More »
- You may be required to change card providers to one which the lender prefers
- You might be prevented from changing premises or closing your business until the loan is repaid
But remember, it's only ever temporary. Average repayment periods are fairly short (4-18 months) so you'll only have to abide by the terms for a small period of time. In most cases, a big cash boost to your business will out-weigh a few temporary terms. « Show Less
Caution: It's not a good idea to deliberately persuade customers to only pay with cash. Lenders will view this as an attempt to avoid repayments and if you're caught doing this you could incur a penalty fee.
3. Regulations Are More Relaxed
This type of funding isn't technically regarded as a business loan, instead, it's considered a sale. You sell a small proportion of your future card sales in exchange for an immediate influx of cash. Because of this, a business cash advance is not protected by the same usury laws as a bank loan. Read More »
However, do bear in mind that it takes months for bank loans to be processed, and that's assuming that you'll even qualify. So, will you have to wait for funding? No. You'll have immediate access to cash for your business! « Show Less
The Final Word
There are several ways to finance your business, but the vast majority aren't as fast or affordable. With a merchant cash advance, you can get cash fast and pay it back at your own pace. There's no pressure or strain on your business and there's no stringent criteria to get approved.
Merchant Cash Advance vs Business Loan What Is The Best Option For You?
The most obvious way of funding any business is to apply for a bank loan, but is this the best option? The traditional way isn't necessarily the best way, especially if you're a small business. Things change for a reason and finance is no exception to this. So, which is better, a merchant cash advance or a bank loan? Let's find out.
How Do They Compare At A Glance?
|Compare||Business Cash Advances||Bank Loans|
|How much could you receive?||£5,000 - £200,000||£5,000 - £500,000|
|What's the fee?||No interest. Just one all-inclusive fee||Between 3.83% and 4.56% APR|
|How long does it take to get approved?||Applications are pre-approved online within minutes.||You could be waiting weeks for an initial decision. In some cases, it could be months.|
|When will you have access to the money?||The funds will be deposited into your account within just days.||It depends on how quickly the bank processes your application, but an average you'll be waiting months.|
|Can you qualify with bad credit?||Yes||No|
|Are repayments fixed?||No. Repayments are always flexible. They are taken as a small percentage of future card sales.||Yes. The bank will give you a fixed figure which you'll have to pay back each month regardless of your business' performance.|
|Collateral?||No. There is no personal obligation with a cash advance.||Yes, many banks will request collateral, especially if you're a small business.|
Merchant Cash Advance vs Traditional Bank Loan
Applying for a bank loan is a complicated and lengthy process. The average application involves multiple meetings with the bank and masses of paperwork to complete and sign. Ultimately, the slower the application process, the longer it will take for you to receive the loan.
Applications for a business cash advance are simple and straightforward. You can apply online, just by filling out a short, 1-2 page form. There are no meetings, calls or paperwork necessary.
Expert Advice: Questioning whether a lender is trustworthy? Find useful information on how to spot a disreputable loan provider over at the Money Advice Service. We advise that you check this out before finalising any agreement for business finance.
Qualifying for a bank loan is difficult. The criteria to qualify is incredibly strict. You'll need a near perfect credit score to even be considered, and you'll need to offer valuable assets as collateral. Most small business owners don't have access to valuable assets, so this simply won't be an option for them.
With an advance the approval rates are far higher, and the qualifying criteria is more relaxed. Providing that your business makes a good amount of revenue in card sales each month, providers will still consider you even if you have bad credit. There's no need for collateral and no personal obligation, so you can sleep easy knowing that your home is always safe!
Accessing The Money:
It can take months to receive a bank loan. Bank's are notorious for taking a long time to process and review applications, so you could be left waiting months just for a decision, let alone the capital your business needs.
Cash advance loans are deposited into the business owner's account within just 7 working days! If you need the capital urgently, as most small businesses do, this is the most efficient and effective choice.
Caution: Bank loans often impose high penalty charges and late fees. If you find yourself unable to repay one month, you may be forced to borrow more money just to cover the cost of charges. This can create a vicious cycle of debt that's extremely hard to get out of.
Bank loans aren't as cost-effective as they may at first seem. Repayments span over longer periods (up to 25 years) so monthly repayments are usually small and interest rates can be low in comparison to other loan providers (4.56%). Sounds great right? Wrong. Please don't be fooled! Paying in small amounts over a longer period will always mean that you'll pay more interest overall, so you're not actually getting the best deal.
Repayments for a cash advance are flexible and easily manageable. There's no fixed repayment date so you'll never incur any late fees. Simply pay back using a small pre-agreed percentage of your daily card sales, until the loan amount is repaid. Most businesses are typically able to repay in full, within 4-18 months, so you'll be free of any debt far quicker than you could with a bank loan.
Overall, a business cash advance is much faster and easier to attain than a business loan. If you need significantly larger amounts of money (over £200,000) to buy property or land and you've got time to wait, a bank loan could be suitable. However, if you're a small business with limited assets and you need quick capital to cover a short-term cost, a cash advance is definitely your best option.
How Do You Find The Best Lender? 6 Tips For Choosing The Best Cash Advance Lender
Having problems with cash-flow? A business cash advance is a great solution, especially if you're a small business or start-up. Whatever your industry or sector, all businesses require capital to operate and grow, but how do you choose the right lender? In this section we share our 6 top tips to ensure that you make the right choices.
Tip 1 - Check That You Qualify
The criteria to qualify for a cash advance will vary from company to company. So, before you consider applying for a specific lender, you want to check that you meet their criteria. Usually, you'll need to answer 'yes' to the following three questions:
- Are you a UK business?
- Are you over 18?
- Does your business make a minimum of £5,000 a month in card sales?
Tip 2 - Research The Company
See if they're on the Financial Services Register. If you didn't already know, this is a public register which holds detailed information on finance firms in the UK. If a lender isn't registered with the FCA, it could suggest that they have something to hide and it's probably best to avoid using their services.
Further still, if you borrow from a provider that isn't registered, you won't be covered if anything goes wrong. It only takes two minutes, and you can check online here.
Expert Advice: Check company reviews. Researching what past clients have to say is a really effective way of determining how reliable a lender is. Most lenders feature reviews on their website, but you can also find them simply by searching online.
Tip 3 - Do They Understand Your Business' Needs?
Find out exactly what they can offer you. The main benefit of a cash advance is that you can access business capital fast. Find out how much capital they can offer you and how quickly they can provide you with the funds.
Are they experienced in dealing with your specific situation? If you're a small business, you'll want to know if the lender is experienced in helping SMEs. An easy way to do this is to take a look at the information featured on the company's website. Is it aimed at large businesses or small businesses? Start-ups or well-established firms? Doing this will quickly reveal which lender you identify with the most.
Tip 4 - Are They Honest?
- The best providers are completely transparent about their terms. A trustworthy lender will discuss everything with you upfront. If they try to avoid doing this, be wary! They're most likely trying to pressure you into a deal which isn't in your business' best interests. Never feel coerced into accepting terms that you're not happy with for the sake of acquiring cash as quickly as possible.
Caution: Beware of lenders who try to push you into borrowing more than you can afford. Trustworthy lenders might offer you a larger loan amount than the sum you initially applied for, but they'll never try to force this on you!
Tip 5 - Check The Fee
- What's the cost? No matter how big or small the amount borrowed, all business loans come at a cost. You will always have to pay a fee for the convenience of using the lender's service, so find out exactly what that fee is.
Tip 6 - Ask Questions
- If you're unsure about any aspect of the lender's terms always ask questions. Doing this will give you more information about the process and a good feel for the way the company operates. Are they helpful and supportive, or are they dismissive and uncooperative? You're going to have a financial relationship with the lender for at least a few months, so you want to be sure that they're a good communicator.
Why Choose Merchant Cash Express?
- We're legitimate. We're on the Financial Services Register, so you know that the service we're offering is safe.
- We tell the truth. We're upfront about all of the fees and terms.
- We're cooperative. We are more than willing to answer questions and explain things to you in more detail if you need us to.
- We specialise in solving small business problems. Merchant Cash Express recognises the difficulties small businesses face and aims to deliver a service which best accommodates your needs.
- There's no pressure. We offer free no obligation quotes and flexible repayment plans to suit all business types.
Business Cash Advance vs Credit Cards Making The Right Choice
Alternative options, like cash advances, are newer and less heard of than traditional finance. Consequently, when a business needs help with cash flow, their first thought is often to apply for a credit card. It could seem like the most obvious option, but is it the best choice? Could a merchant cash advance be the better alternative? Let's explore.
Here's how they compare at a glance:
|Business Cash Advance||Credit Card|
|How much could you receive?||A cash lump sum of between £5,000 - £200,000||A specific limit reaching up to £25,000 (this amount varies depending on the credit card provider)|
|Can you still qualify if you have an imperfect credit rating?||Yes||No|
|What's the cost?||One fixed fee||Typically starting at 21% APR|
|How do repayments work?||Repayments are flexible, not fixed. You repay via a small percentage of your total daily card sales.||Repayments are made as fixed monthly payments.|
|Are there any additional fees?||No. There are never any late fees or additional charges. Just one loan amount and one clear cost to repay.||Yes. Credit cards impose late charges and annual fees for continuing to use their service.|
What Can A Credit Card Offer Your Business?
A business credit card won't technically provide you with a lump sum amount, instead, it will provide you with a specific limit that you can't exceed (up to £25,000). This is known as revolving credit and it could be useful for businesses who don't have one clear cost to cover.
Perhaps you need consistent monthly help to meet rental payments on your premises? Providing that you can repay the amount borrowed back by the end of each month, this could be a suitable financing option for you. However, in most cases small business' need much longer to repay. This is when credit cards become a very expensive way to borrow business working capital. Read More »
What Are The Benefits Of Using A Business Credit Card?
- Credit cards sometimes come with sign up bonuses, which could be of further use to your business. Bonuses can include free insurance and free delivery for selected periods.
- You'll have continuous access to capital. They're an effective way to fund regular payments and ongoing expenses (providing that you always pay back the amount borrowed, by the end of the month of course.)
What Are The Drawbacks Of Using A Business Credit Card?
It's difficult to attain. Credit cards aren't available to everyone and if your personal credit rating is less than perfect, it's highly likely that you won't qualify.
Credit-card repayments can become very expensive. If you fail to pay back the entire amount borrowed by the end of the month, you'll be charged a heavy late fee. If your business unexpectedly experiences a slow season, and you're unable to make repayments for a number of months, you can quickly rack up a crippling amount of debt.
Most credit card providers charge an annual fee. For every year that you continue to use the credit card, you'll incur an additional charge. So, while it might seem like a good long-term financing solution to start with, the hidden fees can make it a very expensive option.
There is a real danger of becoming dependent upon a credit card. Business owners frequently fall into the trap of relying on a card to pay all of their business' expenses. It's very easy to keep spending until the card's limit is reached, and if this happens, a business will struggle to continue operating. You may be forced to borrow more money, or even shut down. « Show Less
Why Choose Us: We're regulated by ICO which means all of our work has to comply with the General Data Protection Regulation. In essence, you can rest assured that all of your information will remain 100% confidential and secure.
How Does A Business Cash Advance Compare?
More frequently now than ever, small businesses are seeking alternative means to finance their companies. A cash advance is easier to obtain, faster to access, and more flexible to repay than most traditional financing options.
Your business will receive an immediate cash injection of between £2,500 - £200,000 within 7 working days of applying. A very small percentage of your future card sales will then be given to the lender, by your card processor, each day until the amount is repaid in full. It really is as simple as that. Read More »
What Can A Cash Advance Offer You That A Credit Card Can't?
No late fees. Repayments aren't fixed, so it's near impossible to default on repayments.
A repayment plan that is sympathetic to your business' needs. Paying back a percentage of what you earn, instead of a fixed figure each month means that you'll never be expected to pay more than your business can manage. If you happen to sell less than expected, the amount you'll repay will also be less.
It's safer. A business cash advance is a lot less dangerous than a credit card. It's less dangerous than a credit card as you receive an exact amount, so you won't even have the option to spend more than your business needs. Simply receive your advance and use the funds to grow your business however you see fit.
It's easier to qualify. Lenders will not judge you based on your credit rating. They're mainly interested in how much your business makes through monthly card sales. If you have imperfect credit you can still qualify!
There are no hidden fees or additional charges. Unlike a credit card, you'll never be hit with a sneaky annual fee. Lenders will always discuss and agree everything upfront with you before any capital is exchanged. There are no costly surprises with a cash advance. Unlike a credit card, you'll never be hit « Show Less
If you've got a clear cost to cover and you want the money quickly, a business cash advance is a perfect solution. If you need more consistent help with costs, a credit card could be more suitable but beware of the hidden fees and additional charges!
Is A Merchant Cash Advance Right For Your Business? Making A Decision
It's an affordable and effective way to access cash fast, but is it the most suitable financing option for you? You've worked hard to get your business up and running, so you don't want to risk it all on the wrong type of lending. To ensure that you make the right decision, it's worthwhile asking yourself the questions outlined in the following section:
1. How Long Do You Want To Borrow For?
A business cash advance should not be considered a long-term financial solution. It is there to provide short-term financial relief – short being the keyword. If used in this way, this type of lending can be tremendously useful.
However, if your business needs consistent help with funding, it's probably not the most suitable option. For example, an advance can effectively cover a short-term dip in your business' performance, but it won't continuously help you to cover the monthly rental costs of your premises.
Expert Advice: Don't just take our word for it - the benefits of alternative lending are also recognised by world-renowned, financial media institution Forbes. Read their take on cash advances here.
2. Why Do You Need The Loan?
Before applying for any form of financial service you need to seriously consider what it is that you need the loan for. A cash advance will only be effective if it is used to grow your business. Good reasons to get a cash advance include: Read More »
- Additional advertising and marketing expenses
- Renovations and refurbishments
- One-off bills
- Covering a rough patch in sales
- Purchasing new stock
- Upgrading and repairing old equipment « Show Less
Expert Advice: If your business is struggling to manage it's cash-flow because of debt repayments, you may want to seek some independent financial advice. You can find useful information on managing debts here.
3. Can You Afford A Business Cash Advance?
Firstly, remember that this type of business funding is designed to be manageable and flexible. Repayments for cash advances are intentionally structured so that you don't find yourself unable to make repayments. As long as you make a monthly average of £5,000 through your customer card transactions, you will be able to repay the advance comfortably. Read More »
How Do You Make Repayments?
In most cases, the lender will work directly with your terminal provider to make repayments as simple and hassle-free as possible. The card provider will routinely withhold the pre-agreed percentage from your total card sales and transfer it to the lender at the point of sale. This way you don't have the headache of setting up a direct debit.
The best way to think of it is like income tax - deductions are made automatically by a third party before you receive revenue. You spend less time worrying about repayments and have more time to concentrate on your business. « Show Less