Merchant cash advance
What is a merchant cash advance (MCA)?
How does an MCA work?
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MCA is a relative newcomer to the world of commercial finance, available to retail-facing businesses (merchants) that accept debit and credit card payments from their customers.
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This innovative product uses a merchant’s card terminal to ‘secure’ the financing. Repayments are then made to the MCA provider according to an agreed split of each day’s card payments.
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The MCA is aligned to the merchant’s business – the higher the level of debit and credit card payments, the faster the MCA is repaid.
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This provides flexibility, since the business is not put under cashflow pressure during slower periods.
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Personal credit score and residential status have little bearing on eligibility when repayments are driven by the level of card payments.
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Typical MCA size is 2x the merchant’s average monthly card sales.
Featured case study: Bike shop
A bike shop based in Leicester which had only been trading for 8 months was finding it difficult to obtain funding. Despite a fantastic start to the business and having an online store which enabled them to sell a vast number of bicycles during the first lockdown, they were being held back by their short trading history and lack of security.
Within 24 hours, they were approved by one of the leading MCA companies on the market and had secured £40k in funding to finish their marketing campaign for Christmas and purchase some extra stock.
