Invoice Finance vs Merchant Cash Advance UK 2026

How Each Works

Invoice Finance

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

Process:

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

Merchant Cash Advance

Borrow against future card sales. You receive lump sum upfront and repay via daily percentage (10 to 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 to 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 to 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 to 80% on funding costs).
If you're B2C: MCA is your best alternative financing option.