All funding products

Merchant cash advance.

A merchant cash advance is an upfront sum repaid as a fixed percentage of future card sales. The provider takes a slice of every transaction until a pre-agreed total — the advance plus a fee — has been repaid. It's marketed as flexible. The flexibility is real, but so is the cost: most MCAs work out at 40%–80% APR once the maths is honest.

The basics

What is a merchant cash advance?

You receive, say, £50,000. You agree to repay £62,500 — the advance multiplied by a "factor rate" of 1.25. Repayment happens automatically through your card terminal: every time a customer pays by card, the provider takes 10–20% of the transaction. There's no fixed term. The faster sales come in, the faster the advance is repaid.

That's the simple version. The mechanics matter:

• Factor rate, not interest rate. A factor rate of 1.25 sounds like 25%. It isn't. Because you start repaying immediately, the effective APR is much higher — usually two to three times the factor.
• Holdback rate. The percentage of each transaction taken until the advance is settled. Typically 8–20%.
• Estimated term. Calculated from your historic card volume. Faster sales shorten the term and raise the effective APR. Slower sales extend it and reduce APR — but the cash drag is the same.

Fit

When it works well.

MCAs solve a narrow set of problems:

• Short, defined working capital needs in seasonal businesses — a pub funding refurbishment before summer trading, a takeaway buying equipment before Christmas.
• Genuinely fast funding when traditional finance is unavailable in the timeframe and the cost of inaction is higher than the cost of capital.
• Businesses with strong card revenue but weak balance sheets — newer companies, businesses with thin trading histories, or those carrying recent losses that close other options.
• Short payback period. If the advance is fully repaid in 4–6 months and the cash funded a project that earned more than the cost, the maths can work.

The right shape: a temporary need, a credible plan to use the money productively within weeks, and a card revenue base strong enough to absorb the holdback without crippling daily cash flow.

The honest part

When it's a bad idea.

MCAs are the most over-sold product in UK SME finance. They go wrong more often than they go right:

• You're using it to plug a structural gap. If margins are negative or marginal, the holdback will accelerate the underlying problem.
• You don't actually have card revenue. Some providers offer "MCA-style" advances against bank receipts. They're more expensive and harder to monitor.
• You're being offered a "stack" — a second or third advance on top of an existing one. Stacking is how businesses end up with 50%+ of card revenue going to repayments. Most stacked borrowers default within 9 months.
• You're being offered a "renewal" — repaid early, take more. Providers love this because the effective APR resets and grows. Borrowers love it because it feels like progress. It usually isn't.
• You're using it to refinance another MCA. Once businesses enter the refinance cycle, the only way out is usually insolvency or a structured workout.
• Your alternative is a 9% term loan. If a bank loan is on the table, an MCA is almost never the right call.

MCAs are unregulated in the UK. There is no FCA cap on rates, no requirement for clear APR disclosure, and limited recourse for borrowers who feel they were mis-sold. Treat marketing claims with extreme scepticism.

Cost

Real costs.

The factor rate is the headline; the APR is the truth.

Factor rate	Estimated term	Approximate APR
1.15	6 months	~50%
1.25	6 months	~80%
1.30	9 months	~65%
1.40	9 months	~85%
1.45	12 months	~75%

On top of the factor rate, expect arrangement fees of 1%–4%, sometimes deducted from the advance.

Operational reality

Speed, complexity, certainty, flexibility.

Speed

Fastest mainstream funding option in the UK. Most deals fund within 24–72 hours from application to drawdown. The product is built around card terminal data, which automates underwriting.

Complexity

Low to apply. The provider integrates with your card processor, pulls 6–12 months of transaction data, and quotes from there. Documentation is light. Personal guarantees are usually required.

Certainty

High at the application stage — most viable applicants get an offer. Lower at the renewal stage — providers pull back quickly if revenue dips.

Flexibility

Repayment flexes with sales, which is the genuine selling point. The day you trade £4,000, you repay £600. The day you trade £400, you repay £60. That can be useful for genuinely seasonal businesses. It can also disguise how much the product costs in absolute terms.

In the market

Who actually uses it.

UK MCA volumes have grown sharply since 2020 as banks pulled back from hospitality and retail. Major providers include YouLend, Liberis, Sirius365, 365 Business Finance, and Capify. Many advances are also originated through partnerships with payment providers — Square, SumUp, Worldpay, Stripe — directly inside the merchant dashboard.

Typical user profile: hospitality, retail, beauty, takeaway, gyms, salons. £10,000–£250,000 advance, £30,000–£300,000 monthly card volume, 12+ months trading history.

Other options

Alternatives.

• Unsecured term loan — much cheaper if available; even at 12% APR the total cost is a fraction of an MCA.
• Revenue-based finance — a structurally similar product to an MCA but priced more like a loan; sometimes more appropriate for digital/SaaS businesses.
• Asset finance for equipment — if the use of funds is a tangible asset, far cheaper.
• Supplier credit — extending payment terms with key suppliers, which costs nothing.
• Invoice finance — for B2B-mixed businesses with receivables.
• Doing nothing. If the only available capital costs 70% APR, the right answer is sometimes to delay the project until cheaper funding is accessible.

Summary

Summary.

Merchant cash advances solve a real problem — fast, flexible capital for businesses that traditional lenders ignore. They also generate more financial damage in UK SMEs than any other mainstream product, because they're routinely sold to borrowers for whom they are exactly the wrong tool.

If you're considering an MCA: model the deal as an APR, not a factor rate. Map the holdback against your daily cash flow, not your monthly revenue. Refuse stacked offers. And ask, with brutal honesty, whether you're using the advance to grow the business or to delay confronting that the business needs to change.