What is a merchant cash advance? How card-takings finance works
By SendPay Business · · 2 min read
A merchant cash advance (MCA) gives a business a lump sum now in exchange for a share of its future card sales. Instead of fixed monthly repayments, a set percentage of each day's card takings goes to the provider until the agreed amount is paid back.
How it works
- The provider looks at your past card sales to decide how much to offer.
- You agree an advance and a total repayment amount.
- A fixed percentage of each card sale goes to the provider.
- Repayments rise on busy days and fall on quiet ones, until the total is paid.
The factor rate
MCAs are usually priced with a factor rate rather than an interest rate. A £10,000 advance at a factor rate of 1.3 means repaying £13,000. If sales are strong and you repay quickly, the effective annual cost can be very high, so work it out before signing.
Pros and cons
MCAs can be quick to get and flex with sales, which suits seasonal businesses. But they often cost more than a bank loan, and they usually aren't regulated as consumer credit, so there are fewer protections.
Where SendPay fits
SendPay doesn't offer lending or cash advances. SendPay platforms let your customers take payments by payment link, invoice and online store under your own brand, powered by licensed partners.
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How do I work out what an advance will cost me?
Enter the advance, factor rate, holdback and your card takings, and the free calculator shows the total repaid, how long it takes and the yearly rate it works out to.
Merchant cash advance calculator →Read next
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.