Funding
Merchant Cash Advance vs Bank Loan
MCA vs traditional loan - which is right for your business? Cost comparison, approval times, and when each option makes sense.
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FUNDING GUIDE
•Jamie Carrell, Business Funding Specialist
•Oct 28, 2025
•Based on 190+ restaurant MCA applications
Merchant Cash Advance for UK Restaurants: What I've Learned From 190+ Applications
The honest truth about MCAs from someone who's actually processed hundreds of them
Quick Answer
A Merchant Cash Advance (MCA) provides UK restaurants with £5,000-£250,000 in funding based on card sales. Repayment is 5-20% of daily card transactions with no fixed monthly payments. Approval takes 24-48 hours. Most MCA providers don't require personal guarantees, though requirements vary by lender.
MCA Key Facts:
- ✓Funding: £5,000-£250,000 based on monthly card turnover
- ✓Repayment: Automatic from daily card sales (5-20%)
- ✓No fixed monthly payments - varies with sales
- ✓Factor rates: 1.1-1.5 (total cost 10-50%)
Based on 190+ restaurant MCA applications by Jamie Carrell (2020-2025)
Right, let's talk about Merchant Cash Advances for restaurants. I've processed about 190 of these over the past few years, and I reckon half the industry still doesn't properly understand them. They're not loans (legally they're not), and they're definitely not for everyone. But when they work, they really work.
The basic premise: Someone gives your restaurant a lump sum - anything from £5k up to £250k depending on your card sales. Then they automatically take a small percentage of your daily card takings until you've paid back the agreed amount. Busy Saturday night? They collect more. Dead Tuesday in January? They collect less. It's genuinely flexible, which matters in hospitality.
I've seen MCAs used brilliantly (Birmingham pizza place funded a second location, paid it back in 11 months, now running three sites). And I've seen them used poorly (restaurant already struggling, took funding to cover losses, made things worse). So let's get into what works and what doesn't.
MCA vs Bank Loan: Side-by-Side Comparison
| Feature | Merchant Cash Advance | Bank Loan |
|---|---|---|
| Approval Time | 24-48 hours | 2-6 weeks |
| Amount Available | £5,000 - £250,000 | £10,000 - £500,000 |
| Documentation | 3-6 months bank statements | Full accounts, forecasts, security |
| Repayment | 5-20% of daily card sales | Fixed monthly payments |
| Personal Guarantee | Not required | Usually required |
| Factor Rate / APR | 1.1-1.5 factor (10-50% total cost) | 6-15% APR |
| Credit Check | Soft check only | Hard check required |
| Best For | Short-term needs, poor credit | Long-term projects, good credit |
Comparison based on typical UK restaurant funding scenarios. Data current as of January 2025. Source: MerchantSwitch funding analysis.
Why Restaurants Choose Merchant Cash Advances
Speed: 24-48 Hours
Bank loans take 4-12 weeks. MCAs are approved within 24 hours with funds in your account in 1-3 days. Perfect for time-sensitive opportunities like bulk ingredient purchases or equipment replacements.
Flexible Repayments
Repayments match your sales - busy Saturday pays more, quiet Monday pays less. No fixed monthly payments that strain cash flow during off-peak periods.
90%+ Approval Rate
Approved based on card sales history, not credit score. Restaurants declined by banks often qualify for MCAs if they process regular card payments.
Often No Personal Guarantee
Most MCAs don't require putting your home at risk. Based purely on your business's card sales performance, not personal assets.
Real Restaurant Example
Real Client: Pasta Restaurant Near Albert Square, Manchester
This happened last March - owner said I could share the numbers
What They Needed:
- • Card sales: £42,800/month average
- • Funding needed: £38,500 (commercial oven + ventilation)
- • Barclays said no (only 16 months trading history)
- • January/February typically 40% quieter
What Actually Happened:
- • Got them £38,500 MCA
- • Factor rate: 1.13x (£43,505 total repayment)
- • Collection rate: 7.5% of daily card sales
- • Approved: Same day (applied Tuesday 10am, approved by 4pm)
- • Money in bank: Thursday morning
How It Actually Played Out:
Good Month (March)
£3,780 collected
Typical (April-Oct)
£3,210 collected
Quiet (January)
£1,890 collected
Cleared in 13 months. Total cost: £5,005 (13% of advance). Owner said the flexibility through quiet months made all the difference - fixed loan payments would've been brutal in January/February.
What Do Restaurants Use MCA Funding For?
Kitchen Equipment
Ovens, fridges, dishwashers, ventilation
Renovation & Refurbishment
Dining area upgrades, decor refresh
Stock & Inventory
Bulk food purchases, wine stock, seasonal prep
Marketing & Growth
Menu launches, local advertising
Seasonal Coverage
Cover bills during quiet January/February
Staff Costs
Hiring, training, covering wages
Restaurant MCA Eligibility Requirements
You likely qualify if:
Trading for 3+ months
Process £10k+/month in cards
Have a card machine or online orders
No perfect credit score needed
Why MCAs Work Well for Hospitality
1. Seasonal Flexibility
January and February are typically quiet for restaurants. With fixed loan payments, this creates cash flow pressure. MCAs automatically adjust - quiet months mean smaller repayments, preserving cash when you need it most.
2. No Collateral Required
Banks often want security against property or equipment. MCAs are based solely on your card sales performance - your daily revenue is the security. This means you're not risking personal assets.
3. Fast Approval for Urgent Needs
When your walk-in fridge breaks mid-summer service or you spot a rival restaurant closing (opportunity to acquire their clientele), you can't wait 8 weeks for bank approval. MCAs fund in 48 hours.
4. Works with Poor Credit
Many restaurant owners have been declined by banks due to past business failures or thin credit files. MCAs focus on current trading performance, not historical credit issues.
What Does an MCA Actually Cost?
Example: £50,000 Advance for Restaurant Renovation
Advance amount:£50,000
Factor rate:1.12x
Total repayment:£56,000
Total cost:£6,000 (12%)
Monthly card sales:£60,000
Daily deduction:7% of sales
Monthly collection:~£4,200
Time to repay:~13 months
Why this works: The renovation increases covers and average spend, generating £8k+ extra monthly revenue. The MCA is self-funding.
MCA vs Traditional Restaurant Loan
| Feature | Bank Loan | Merchant Cash Advance |
|---|---|---|
| Approval Time | 4-12 weeks | 24-48 hours |
| Credit Check | Strict requirements | Minimal |
| Repayment | Fixed monthly | % of daily sales |
| Personal Guarantee | Usually required | Rarely required |
| Seasonal Flexibility | None | Automatic adjustment |
Get Funding for Your Restaurant in 48 Hours
See how much you qualify for based on your current card sales. No obligation, no impact on credit score.
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