Invoice Finance vs Merchant Cash Advance UK 2025

How Each Works

Invoice Finance

Borrow against unpaid B2B invoices. You send goods/services to customer on credit terms (30-90 days). Instead of waiting for payment, you sell the invoice to a finance company for 80-90% upfront.

Process:

1. Complete work, issue invoice to customer (net 30 days)
2. Upload invoice to finance provider
3. Receive 80-90% advance within 24 hours
4. Customer pays invoice (to finance provider)
5. You receive remaining 10-20% minus fee (typically 1.5-4%)

Merchant Cash Advance

Borrow against future card sales. You receive lump sum upfront and repay via daily percentage (10-20%) of card takings.

Process:

1. Apply showing 6+ months card processing history
2. Get approved based on monthly card volume
3. Receive funds in 24-48 hours
4. Automatic daily deductions from card sales until repaid
5. No fixed payment amount - flexes with sales

Cost Comparison: £20,000 Over 6 Months

Which Should You Choose?

Choose Invoice Finance If:

• You're B2B (sell to other businesses)
• You offer credit terms (net 30, 60, or 90 days)
• Your customers are creditworthy
• You invoice at least £50,000 annually
• You want lowest cost funding

Choose Merchant Cash Advance If:

• You're B2C (sell to consumers)
• You process £5,000+ monthly in card payments
• You need flexible repayment (tied to sales)
• You have bad credit (MCA less credit-dependent)
• You need funding very fast (24-48 hours)

Conclusion

Invoice Finance is significantly cheaper (16% APR vs 60% APR) but only works for B2B businesses with invoiced sales. Merchant Cash Advance is more expensive but accessible to any card-accepting business and offers flexible repayment.

If you're B2B: Always choose Invoice Finance over MCA (save 60-80% on funding costs).
If you're B2C: MCA is your best alternative financing option.