A Business Cash Advance, otherwise known as a Merchant Cash Advance, allows you to raise finance based on your business's credit card turnover. So, what's the process?





Typically, you can receive a cash advance loan equivalent to your average monthly turnover. You repay this amount, plus a fee, by agreeing to give a small percentage (usually 10-15%) of all card receipts to the advance provider until the finance is paid off and the balance is cleared. This is done automatically via the card terminal with each transaction, and you don't have to change your card processor. Unlike traditional bank loans, there are no time constraints on this. In quieter times when less money is coming through your card terminal, you'll pay less money back. In busier times when more money is coming through, you'll pay more money back.





Should I get a loan or a Business Cash Advance?

Although they share a few similarities, a loan and Business Cash Advance are two very different products. One of the main differences between the two is the way they're paid back. Whilst a cash advance is paid back as a percentage of your business's debit or credit card sales over an open-ended period of time, with no collateral or personal guarantee required, bank loans work with fixed repayments.





With a bank loan, you might find yourself short of your repayments if you go through a quiet period. That can quickly become stressful. With a cash advance, you have the flexibility that traditional finance just can't offer. It's super manageable and scalable.



To benefit from a Business Cash Advance, you need to be making the majority of your revenue through a card terminal. If this doesn't sound like your business, you might be better off considering a Short Term Unsecured Business Loan. Don't worry - we can help with those too. Just get in touch.





How does a Business Cash Advance work?

Let's say for example that you need quick access to cash. It's your restaurants busiest season and a fridge suddenly breaks and needs replacing as soon as possible. You could get a Merchant Cash Advance and borrow the equivalent of your business's average monthly turnover.





If your business is in reasonably good health and of course if it receives most of its payments via a card terminal, there shouldn't be too many problems obtaining this source of funding. If a cash advance is agreed, a lump sum should go directly into the business's bank account within weeks, or even days. This compares to the weeks or even months that many could be left waiting to gain access to traditional finance.





You repay this money over time by giving a percentage of card sales (typically 10-15%) towards the repayment with no deadlines. It simply takes as long as it takes. This source of finance is very flexible with adverse credit histories, if that's something that you're worried about. It's important to note however that your business must have been trading for a minimum of 9 months.





A Merchant Cash Advance also frees you up to use another type of finance alongside it, such as a bank loan or equipment lease, in the knowledge that the cash advance won't imperil your entire financial future in the way that other loans can if you are unable to keep up with the repayments. There's also no need to change your PDQ card processor.