Merchant cash advance
A lump sum advanced against future card sales, repaid automatically as a fixed percentage of each day's card takings until an agreed total is repaid.
This is the one facility that flexes with your takings — repay more in a strong week and less in a quiet one. That makes it genuinely well suited to seasonal trade, and it is worth understanding how it is priced so you can judge when it is the right tool.
The parameters
Where this product sits.
Ranges across the market, so you can sanity-check any quote — ours or anyone else’s — before you take it seriously.
- Advance
- 1× monthly card
- Roughly one month of card turnover. Strong, consistent traders reach 1.5×.
- Factor rate
- 1.1–1.5
- Total repayable is the advance multiplied by this. A £50,000 advance at 1.3 repays £65,000.
- Holdback
- 10–20%
- The share of each day's card takings that goes to the lender until the total is cleared.
- Effective duration
- 6–12 months
- Not a term — it is however long the takings take. Trade well and you finish sooner, which does not reduce the cost.
- Card history
- 4–6 months
- Lenders read the merchant statements directly. Consistency matters more than volume.
These are indicative market ranges rather than a quotation — they are here so you can sanity-check any offer you are shown. Your own terms will be priced on the asset, the borrowing entity, your trading history and the exit, and we will put real figures in front of you on the first call.
Typical cases
What it is used for.
Seasonal businesses
A pub, restaurant or seaside retailer facing a quiet January repays little in a quiet January. That flex is the genuine advantage over a fixed monthly loan.
Refit and refurbishment
Funding a shopfit or kitchen refurbishment that will lift takings, repaid out of the takings it produces.
Stock purchases before a peak
Buying ahead of a known trading peak where the stock will convert to card sales within months.
Businesses that cannot secure anything
A leasehold hospitality business with no property, no significant plant and thin accounts has very few options. This is one that works.
In detail
How it works in practice.
What a factor rate actually costs
A factor rate is not an interest rate and cannot be compared with one directly. A factor of 1.3 on £50,000 means you repay £65,000 in total — £15,000 of cost — regardless of how long it takes.
If that £65,000 clears in twelve months, the cost is roughly equivalent to an APR in the mid-fifties, because you are paying £15,000 for money you had the use of, on average, for about half the period. If it clears in six months because trade is strong, the effective annualised cost roughly doubles. Repaying early costs you more, not less.
We will always show you this alongside the alternatives. Where a secured or unsecured facility is available to you it will usually work out cheaper, and we would rather point you there — the aim is the facility that suits your trade, not the one that completes fastest.
When it is genuinely the right answer
Where takings are volatile and a fixed monthly payment would break the business in a bad month, the holdback structure does something no term loan does: in a week with no trade, you repay nothing. For a seasonal hospitality business that is not a marketing line, it is the difference between surviving February and not.
It also suits businesses with no security to give. A leasehold café with a five-year lease, no plant worth recovering and eighteen months of accounts is close to unfundable by conventional term lenders, and perfectly fundable here.
What it does not suit is a business using it to cover a structural loss. Because it takes a share of every day's takings, it reduces the cash available to trade with from the day it starts — and the usual response, taking a second advance, is where businesses genuinely come unstuck.
Stacking, renewals and the point of no return
Most providers will offer a renewal once you are 60% to 70% through the advance. Taking it resets the balance and rolls the outstanding amount into the new advance, so you pay the factor rate again on money you have already paid a factor rate on.
Taking a second advance from a different provider at the same time — stacking — increases the combined holdback against the same daily takings. Two advances at 15% each means 30% of every day's card income leaves before you have paid a supplier.
If a renewal is being offered because the current advance feels tight, there is usually a better answer — refinancing the whole thing onto a term facility at a lower cost. That is a conversation worth having with us before you accept one.
Before you sign
Four things worth checking.
Early repayment does not save money
The total repayable is fixed at the outset. Trading well shortens the period and increases the effective annual cost.
Changing card provider mid-advance
Usually a breach. The facility is tied to the merchant account the takings flow through, so switching acquirer needs the lender's consent first.
The holdback is on gross takings
It comes off the top, before card processing fees, VAT and your suppliers. Model the daily cash position, not the monthly one.
Personal guarantees are still common
Despite being repaid from takings, most providers take a guarantee from the directors and some take a debenture.
Repayment. A loan takes a fixed sum on a fixed date whatever your trade did that month; an advance takes a percentage of what you actually took. In a bad week you repay less, and in a dead week you repay nothing.
The cost of that flexibility is significant. Where your income is predictable, a term loan will nearly always be cheaper.
Usually not. Most providers integrate with the major acquirers and take the holdback from the settlement without changing your terminal.
Some will offer a better rate if you switch to their own acquiring. Compare the total including the new processing rates, not just the factor.
Repayment slows automatically, which is the entire point of the structure. There is no arrears position simply because trade was poor.
If the drop is permanent rather than seasonal, talk to the provider early. Most will discuss a reduced holdback, and all of them prefer that to a business failing.
Not for a standard merchant cash advance, which is calculated from and repaid out of card settlement. A trades business paid by BACS has no card stream to lend against.
Revenue-based facilities that read your business bank account rather than a merchant account do exist and work similarly. Ask and we will point you at the right one.
We will put it side by side with the alternatives on one page — the total cost of each, against your own takings — so the comparison is in front of you rather than asserted.
Where your income is predictable and security is available, something cheaper usually is. Where takings move with the season and there is little to secure against, this structure earns its place, and we will arrange it properly and explain exactly how the holdback will feel week to week.
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Related facilities
Invoice finance
Releasing cash tied up in unpaid sales invoices.
Trade finance
Funding the gap between paying a supplier and being paid.