Is Merchant Cash Advance Worth It? UK 2025
Honest analysis: When MCA's 25-35% cost is worth it vs when it's a terrible idea. Real scenarios, costs compared, and alternatives explained.
Quick Answer
MCA is worth it IF: You need money in 24-48 hours, bank declined you, or the opportunity cost exceeds the high interest. NOT worth it if you can get traditional loan (60-70% cheaper) or can wait for funding.
- • Emergency funding needs
- • Bank declined applications
- • Time-sensitive opportunities
- • Seasonal businesses
- • Good credit (get loan instead)
- • Non-urgent funding
- • Very new businesses
- • Refinancing existing debt
The Real Cost of MCA
Let's be honest: MCAs are expensive. Here's what you're really paying:
Typical MCA Cost: 25-35%
- £20k advance: Pay back £25k-£27k (£5k-7k cost)
- £50k advance: Pay back £62.5k-£67.5k (£12.5k-17.5k cost)
- £100k advance: Pay back £125k-£135k (£25k-35k cost)
Compare to Traditional Loan
£50k traditional loan at 8.9% APR over 2 years:
- Total repayment: £54,580
- Interest cost: £4,580 (9%)
- MCA costs £8,000-£13,000 MORE
When MCA IS Worth It (Real Scenarios)
Scenario 1: Emergency Equipment Repair
Situation: Restaurant walk-in fridge breaks. Replacement costs £15k. Without it, you lose £2,000/day in spoiled food and can't operate.
MCA Cost: £15k at 1.25x = £18,750 (£3,750 cost over 6 months)
Alternative: Wait 2 weeks for bank loan at £1,200 cost BUT lose £28,000 in sales (14 days × £2k/day)
✓ VERDICT: MCA worth it. Pay £3,750 to avoid £28,000 loss.
Scenario 2: Time-Sensitive Stock Purchase
Situation: Supplier offering 40% discount on £50k inventory order if you buy this week (cash only).
MCA Cost: £50k at 1.25x = £12,500 cost
Savings from discount: 40% of £50k = £20,000 saved
✓ VERDICT: MCA worth it. Net gain £7,500 (£20k discount - £12.5k MCA cost).
When MCA is NOT Worth It
Scenario 3: Non-Urgent Expansion
Situation: Want to open second location in 6 months. Need £80k for fit-out.
MCA Cost: £80k at 1.28x = £22,400 total cost
Alternative: Wait 3 weeks for Funding Circle loan at 9.5% = £7,600 cost over 3 years
✗ VERDICT: MCA NOT worth it. Waste £14,800 for no time benefit.
Scenario 4: Refinancing Existing Debt
Situation: Have £40k existing loan at 12% APR, thinking of MCA to pay it off early.
Current cost: £40k at 12% = £4,800/year interest
MCA cost: £40k at 1.30x = £12,000 cost (over 8 months)
✗ VERDICT: Terrible idea. Pay £7,200 MORE to refinance. Never use expensive debt to pay off cheaper debt.
When to Use MCA vs Alternatives
Use MCA When:
- Speed critical: Need money in 24-48 hours, can't wait
- Bank declined: Poor credit, short trading history, seasonal revenue
- Opportunity cost high: Profit opportunity exceeds MCA interest cost
- Flexible repayment needed: Seasonal business where sales vary 50%+
- No personal guarantee wanted: MCA protects personal assets
Use Traditional Loan When:
- You have good credit: Will qualify for 6-12% APR (vs MCA's 25-35%)
- Can wait 1-2 weeks: Not time-sensitive, save 60-70%
- Want lowest total cost: MCA is never the cheapest option
- Large amount (£100k+): Long-term loans much cheaper for big amounts
Conclusion
MCAs are worth it in specific situations: Emergencies, time-sensitive opportunities, bank declines, or seasonal businesses. The 25-35% cost is justified by speed (24-48hrs vs weeks) and flexibility.
MCAs are NOT worth it if you can get traditional loan (good credit, can wait) or the funding isn't urgent. You're paying 3x more for speed you don't actually need.
Key insight: MCA cost isn't just the factor rate - it's the opportunity cost of not getting cheaper alternatives. Always compare before accepting any offer.