image of a card machine enabling merchant cash advances

Merchant Cash Advance – a good way to fund your business

There are a number of ways to seek finance for your business when necessary. Many retailers requiring finance have found that merchant cash advances are a good way to fund their business. Many businesses take card payments from customers on a regular basis, particularly those businesses which are in retail and also those which have an online presence. 

Card payments avoid the need to process cash (which is expensive) and provides a relatively easy way to transact with clients.

To take card payments, businesses sign up with a processor who provides card terminals. There are numerous providers, each having various benefits in terms of delivery, cost of service etc. 

A merchant cash advance provides a loan to the business based on historic card receipts over the last 12 months. Between 1 and 2 months average receipts are usually made available. Repayments are then taken as a percentage of each £ taken through the card machine. 

This means that there are no regular monthly payments and for a seasonal business it means that repayment is made as revenue is generated. 

Lenders in the merchant cash advance marketplace may require the borrower to switch processing providers to ensure that the repayments can be channelled back to the lender. Company security is not usually required although directors guarantees may be requested. 

When a facility is sought, the repayment level is set (which will be more than loan amount, the difference being the interest cost) and the percentage deduction is also agreed. Once in place, the percentage deduction is made on each processing payment. 


Richard Mason of Ludgate Finance wrote this article on merchant cash advances. Richard explains, “following a move to an advisory role in 2007, it became clear that SME’s were struggling to be serviced by the banks. Alternative finance sources were required. With the advent of peer to peer lending, I sourced and completed over 200 deals. I raised in excess of £30 million to support SME’s in their growth and acquisition ambitions.”

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