Merchant Cash Advance
A merchant cash advance or business cash advance is an unsecured short term lending finance option. Capital is needed by every company from time to time, but a bank loan isn't always feasible. A Business Cash Advance offers a very different way of receiving a financial boost but without so many restrictions on the repayments. Merchant cash advance lenders can use this type of additional funding to claim a proportion of your future sales in exchange for an agreed and set amount of cash that is advanced upfront. It uses a card payment terminal or PDQ machine to secure future borrowing. Merchant cash advances are increasingly popular with small to medium UK businesses. The lending is fast and flexible and allows business growth without the need for collateral or any sort of I.O.U. from the company. Any type of business that uses a merchant gateway to receive payment via a PDQ machine can apply to get finance through us.
Expand and contract payment terms in line with sales transactions.
Your merchant gateway provider will work closely with the lender. The business cash advance lender will receive a certain percentage of future transactions until the advance is repaid. The system allows funding to be released against your future card sales. Your business's average monthly card transactions reflect the funds available to you. Repayments are set at a pre-agreed percentage of each sale unit until the advance has been paid back. Typical repayment terms for merchant cash advances range from 6 to 9 months, but your business history could extend the pre-arranged term for up to 18 months. You are allowed to apply to receive new funding once your business has demonstrated a positive pattern of repayment, usually around the halfway point of the term. This increases the amount of cash borrowed and allows an extension of the term.
Traditional bank funding solutions have set interest rates but merchant cash advances just have one simple repayment. A merchant cash advance is an alternative to A high street business loan. It allows business owners to expand and contract payment terms in line with sales transactions. This helps with cash flow and ultimately the expansion of your business. A popular advantage is that your sales determine the amount you can borrow, personal guarantees aren't necessary, nor is any other kind of security. The lack of credit checks accelerates the speed that this type of borrowing takes to arrange. Most lenders can orchestrate funding to be in place within 48 hours. With the cash arriving in your business account soon after. Another great aspect of a merchant cash advance is there are no hidden fees. It is a perfect solution for businesses looking for additional short term funding.
How does it work?
The way a merchant cash advance works is to use your future customer card payments to advance a single payment of cash into your business. This is then repaid by using a small percentage of your future card sales. The lenders will agree to a set percentage of each transaction to go through the PDQ machine in advance so that there is full transparency of the schedule. The monthly turnover of merchant transactions will dictate the sum you will receive by way of the advance. Your business will need to be making monthly transactions of around £5k in card volumes to qualify for card revenue, your merchant statements will provide your sales volume information.
What is in it for my business?
If your business is achieving a good volume of monthly credit card sales but has a cash flow need. This facility is a fantastic way of acquiring the extra funds to fuel expansion. You allow a merchant cash advance company the right to claim a proportion of your future sales in return for advancing an agreed and set amount of cash upfront. It is a very transparent process. The cash advance lender works with your PDQ machine provider and will receive a percentage of future transactions until the cash advance has been repaid. The amount set and agreed is usually around 10% per transaction, this is deducted from future card sales and goes towards paying back the loan. Every time a sale is made and processed via your PDQ Card machine, if, for example, the sale has a value of £100, the revenue you will receive is £90.00. The remaining amount of £10.00 will then go to the merchant cash advanced lender to make repayment towards the advance.
Some of the most flexible repayment terms available.
The lender of the cash advance will agree to the terms of the agreement with the business and once the agreement has been signed the cash will be advanced. The agreement terms include information on the set requirements such as the payback, advance amount, and holdback percentage. These will be discussed before an agreement between both parties is made. Once the agreement is finalised, the advance is transferred to the business’ bank account in exchange for a future percentage of receivables or card receipts, these are your customer card transactions.
During each credit/debit card transaction the percentage amount will be pre-agreed and withheld according to the terms of the agreement.
The withheld percentage will pay back the sum that was initially borrowed. This practice will continue until the advance has been paid. The process is done instantly by the lender being able to access a business owner’s merchant account, eliminating the collateral required for a traditional small business loan.
A fixed percentage is taken from every sale, meaning that the more payments (transactions) the faster the advance is repaid. This rule also applies if the business has fewer transactions in a particularly slow month. The balance will still be getting paid but within less time. Meaning the business pays back the advance that is tailored directly to the business intake of merchant cash deposits. Merchant cash advance repayments are taken from your revenue. The agreed 10% figure doesn’t refer to interest, but rather the proportion of your revenue that will go towards paying back the total loan amount. If you borrow 10k you will repay 10k. There is no set repayment term if it is predicted the business will repay the total advance amount of £10k in approximately ten months, the payback period is flexible and may be shorter or longer, depending on sales. You only pay back when you sell to customers. Although average repayment times tend to be 4 to 6 months as there is no fixed repayment schedule.
Benefits for your business
This method of repayment means that merchant cash advances are more flexible than business loans because instead of a fixed monthly repayment that has to be met regardless of your sales, the amount you repay goes up and down each month in line with your sales. You can advance amounts of up to £200,000 and both credit and debit card sales are used to raise funding. No security or collateral is required to access the advance. The approval rate for applications is about 90% and even companies with bad credit scores are welcome to apply. The application process is quick, repayments are manageable and with no APR. Cash is available to draw down in days. A merchant cash advance is an ideal funding solution for small to medium-sized ventures.
"We believe our service offers UK businesses an alternative to traditional bank lending."
Merchant cash advances are designed for small businesses without the need for a business plan. Lenders may want to take a look at your credit history by way of a soft credit check, which is less intrusive compared to other types of borrowing, and do not leave a footprint. Our team of experts at Winchester Corporate Finance will be able to answer your questions and guide you throughout the entire process. We value our reputation for transparency and our ability to meet the specific funding needs of the businesses we work with.
Email: hello@winchestercf.com
Tel: 01243 786258
5A
East Pallant
Chichester
P019 1TR