A merchant cash advance (MCA) is an unsecured cash lump sum repaid as a fixed percentage of your future card takings. Repayments rise on busy days and fall on quiet ones, which makes it popular with retail, hospitality and other card-heavy businesses.
How it works
The lender advances a sum — usually based on your average monthly card revenue — and agrees a factor rate (e.g. 1.2). You repay the advance multiplied by that factor rate, collected automatically as a small slice of each card transaction until the total is cleared.
A simple example
Borrow £20,000 at a factor rate of 1.2 and you repay £24,000. If you agree a 10% holdback, £1 in every £10 of card takings goes toward repayment. Strong months clear it faster; slow months ease the pressure.
Pros and cons
- Pros: repayments flex with sales, no fixed monthly amount, fast approval, no asset security, weaker credit often accepted.
- Cons: can be more expensive than a term loan, only suits card-taking businesses, the cost is a fixed fee rather than reducing interest.
Who it suits
Shops, restaurants, salons, bars and seasonal businesses that take most payments by card. Compare it with a term loan in our MCA vs business loan guide, and check costs in MCA rates and factor rates.
Frequently asked questions
Is a merchant cash advance a loan?
It is a form of business finance, but legally a purchase of future card receipts rather than a traditional loan, so it is not quoted as an APR.
What if sales are slow?
Repayments are a percentage of takings, so they automatically fall when sales dip.
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Get your free quoteThis article is general information, not financial advice. Eligibility, rates and terms vary by lender and your circumstances. The Loans Hub is a finance broker, not a lender.
