What is a Merchant Cash Advance (MCA)?
A Merchant Cash Advance provides quick business funding in exchange for a percentage of your future card sales. Unlike a loan:
- No fixed monthly payments - repayments flex with your revenue
- Fast approval - often 24-48 hours
- No collateral required
- Based on card sales, not credit score
- Repaid automatically from daily card takings
Basic Eligibility Requirements
| Requirement |
Minimum |
Ideal |
| Monthly Card Turnover |
£5,000/month |
£10,000+/month |
| Trading History |
6 months |
12+ months |
| Card Sales % |
50% of revenue |
70%+ of revenue |
| Credit Score |
Fair (not critical) |
Good (helps approval) |
| CCJs/Defaults |
Some accepted |
None (better rates) |
💡 Key Point: MCA providers primarily care about your card processing volume. A poor credit score won't automatically disqualify you if your card sales are strong.
Funding Amount Calculator
Quick Estimate Formula:
Monthly Card Sales × 1.2 to 2.5 = Potential Funding
Examples:
- £5,000/month = £6,000 - £12,500 funding
- £10,000/month = £12,000 - £25,000 funding
- £20,000/month = £24,000 - £50,000 funding
- £50,000/month = £60,000 - £125,000 funding
⚠️ Important: Most providers cap first-time advances at 1.5× monthly card sales. Established relationships can reach 2-2.5×.
Self-Assessment: Are You Eligible?
✓ Strong Candidates (90%+ Approval Chance)
- £15,000+ monthly card sales
- Trading for 18+ months
- 80%+ sales via cards
- Stable or growing revenue
- Good credit score (above 650)
- No existing MCAs
✓ Good Candidates (70-90% Approval Chance)
- £8,000-£15,000 monthly card sales
- Trading for 12-18 months
- 60-80% sales via cards
- Steady revenue (some fluctuation OK)
- Fair credit score (550-650)
- One existing MCA (almost paid off)
⚠️ Marginal Candidates (40-70% Approval Chance)
- £5,000-£8,000 monthly card sales
- Trading for 6-12 months
- 50-60% sales via cards
- Seasonal business with fluctuations
- Poor credit score (below 550)
- Multiple existing MCAs or debts
✗ Unlikely to Qualify
- Under £5,000 monthly card sales
- Trading less than 6 months
- Under 50% sales via cards
- Declining revenue trend
- Active CCJs or bankruptcy
- Already have 3+ MCAs
Industries: Approval Likelihood
| Industry |
Approval Chance |
Notes |
| Restaurants/Cafés |
Very High |
High card volume, predictable revenue |
| Retail Stores |
Very High |
Stable sales, low chargeback risk |
| Hair/Beauty Salons |
High |
Good repeat business |
| Gyms/Fitness |
High |
Recurring revenue attractive to lenders |
| Hotels/B&Bs |
High |
High ticket values beneficial |
| Trade Services |
Medium |
May have lower card %, but still qualify |
| Online Retail |
Medium |
Higher chargeback risk = more scrutiny |
| Seasonal Businesses |
Medium-Low |
Revenue fluctuations concern lenders |
| Start-ups |
Low |
Need 6+ months trading history |
How to Improve Your Chances
1. Increase Your Card Processing Volume
- Encourage card payments over cash (offer discounts for cards)
- Accept all payment types (contactless, mobile wallets)
- Implement online ordering/booking with card payment
- Wait 2-3 months to build up monthly averages
2. Clean Up Your Credit
- Pay off small debts to improve credit score
- Correct any errors on credit report
- Settle old defaults if affordable
- Get on electoral register (improves credit score)
3. Build Trading History
- If under 6 months, wait before applying
- Show consistent month-over-month growth
- Maintain stable bank balance
- Avoid overdraft usage
4. Prepare Strong Application
- Have 3-6 months bank statements ready
- Prepare 3-6 months processing statements
- Write brief business plan/explanation of funding use
- Show how funding will increase revenue
5. Choose Right Timing
- Apply after strong trading month
- Avoid applying right after slow season
- Wait until any existing MCA is 75%+ repaid
- Don't apply to multiple lenders simultaneously (hurts approval)
What Lenders Will Request
Standard Documentation:
- Business bank statements - Last 3-6 months
- Merchant processing statements - Last 3-6 months
- Business registration - Companies House details or VAT certificate
- Director ID - Passport or driving license
- Proof of address - Utility bill for business premises
- Business plan (sometimes) - Brief explanation of funding use
💡 Pro Tip: Have all documents scanned and ready before applying. Fast document submission = faster approval.
Red Flags That Hurt Approval
- Declining card sales - Consistent month-over-month decrease
- High chargeback ratio - Over 1% of transactions
- Negative bank balance - Regular overdraft usage
- Multiple returned payments - Bounced checks or failed direct debits
- Active county court judgments - Especially recent ones
- Mismatched information - Inconsistencies between documents
- Multiple MCA applications - Applying to 5+ lenders at once
True Cost Example
Scenario: Restaurant needing £20,000
Advance Details:
- Advance amount: £20,000
- Factor rate: 1.35
- Total repayment: £20,000 × 1.35 = £27,000
- Total cost: £7,000
- Repayment rate: 12% of daily card sales
- Monthly card sales: £25,000
Monthly Repayment:
- £25,000 × 12% = £3,000/month withheld
- Repayment period: £27,000 ÷ £3,000 = 9 months
- Effective APR: ~35-45% (high but acceptable for short-term)
Is This Affordable?
- £25,000 sales - £3,000 MCA = £22,000 net receipts
- Can business operate on £22,000 instead of £25,000?
- If yes, advance is affordable
Alternatives to Consider
| Alternative |
Better If... |
Typical Cost |
| Business Loan |
Good credit, longer time frame OK |
5-15% APR |
| Invoice Financing |
B2B with 30-60 day payment terms |
1-3% per month |
| Business Overdraft |
Need flexible short-term cash |
10-20% APR |
| Asset Finance |
Buying specific equipment |
8-15% APR |
| Government Schemes |
Qualify for Start Up Loans or BBLs |
6-8% APR |
⚠️ Be Cautious If:
- You're already struggling with cash flow
- You have multiple existing MCAs
- You're not sure how you'll use the funding
- You can't afford the daily/weekly deductions
- You're using MCA to pay off other MCAs (debt spiral risk)
Next Steps
If you believe you qualify based on this guide:
- Gather your documents - Bank and processing statements
- Calculate affordability - Can you manage the deductions?
- Get multiple quotes - Compare 3-5 providers
- Read terms carefully - Understand factor rate, deduction %, and term
- Ask questions - Clarify anything you don't understand
- Apply with confidence - Or get professional help
💡 Need Help? MerchantSwitch can connect you with MCA providers who specialize in your industry. We'll help you compare offers and choose the best option.