Guide to Merchant Cash Advance For SMEs

Applying for business funding can feel like an extremely time-consuming and complex process. In fact, for many small business owners, it’s a painstaking process to start — especially when you’re a first-timer to funding.

That’s why we’ve partnered with 365 Business Finance, a leading financial provider who specialise in Merchant Cash Advance, a type of business funding designed to give SMEs immediate access to financial capital.

A Merchant Cash Advance, also known as a Business Cash Advance, is an unsecured business finance solution that allows business owners to quickly raise £5,000 to £200,000 in funding.

Read on to discover how a Merchant Cash Advance works, and if this type of alternative finance is ideal for your business.

How a Merchant Cash Advance Works

A Merchant Cash Advance is suitable for businesses that process payments through a card machine (PDQ) and/or online payment system.

365 Business Finance relies on, and assesses, your business’ recent debit and credit card transactions to determine affordability (i.e., is your business seasonal, are sales consistent, how long have you been trading?) and produce a funding offer tailored for your business.

As a rule of thumb, 365 Business Finance are usually able to fund up to 100% of your business’s monthly credit and debit card turnover. For example, a business that processes £10,000 per month in credit and debit card sales, could be eligible to receive £10,000 in funding.

A Merchant Cash Advance, also known as a Business Cash Advance, is an unsecured business finance solution that allows business owners to quickly raise £5,000 to £200,000 in funding.

No APRs or fixed monthly payments

Unlike a traditional bank loan, there are no interest rates or fixed monthly payments to worry about. Instead, repayments are taken from a small percentage of your future debit and credit card payments.

This means repayments mirror the ups and downs of your business, easing financial stress — when you have a quiet period, you simply repay less, and when business picks up, you repay more.

There’s no APR as there is no fixed fee, just one all-inclusive cost that’s agreed on at the start, which never changes.

No Hard Credit Checks or Security Required

Times have been tough recently, and maybe your business has had a bumpy ride financially. Alternatively, maybe you’re just starting out in the business world and don’t have enough credit history.

At 365 Business Finance, they only conduct a soft credit check which does not affect your credit score. From this, they’re able to make a funding decision without running a hard check that will show on your credit report.

In addition, you do not need to supply any security or business plans to secure funding with 365 Business Finance.

At 365 Business Finance, they only conduct a soft credit check which does not affect your credit score. From this, they’re able to make a funding decision without running a hard check that will show on your credit report.

Eligibility

Finding out if you’re eligible for a merchant cash advance is simple. You must:

• Be trading for a minimum of 6 months.
• Process payments through a card machine (PDQ) and/or online payment system.
• Have an average monthly credit and debit card turnover of at least £5,000.
• Be based in the UK.

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Choosing Whether a Merchant Cash Advance is Right for You: What You Need to Consider

There are many benefits to a Merchant Cash Advance, however there are a number factors to consider before deciding if this type of finance is suitable for your business.

Unsecured vs secured funding

Banks often require security or a personal guarantee when taking out a loan, usually in the form of a tangible asset such as commercial property, stock, machinery or a vehicle.

If your business becomes bankrupt or insolvent, the bank can sell the asset to recoup costs. As such, a secured loan from the bank usually entails a lengthier application process, as there are due diligence processes to conduct such as valuations, legal costs and business checks.

A Merchant Cash Advance with 365 Business Finance is unsecured, in that they don’t ask for any security or business plans. Therefore, they can process your application within 24 hours, offering you speedy access to capital.

However, it’s worth noting that a Merchant Cash Advance may in some circumstances appear more expensive than a traditional bank loan, as 365 Business Finance are providing business finance without any security. This is why your business’ trading history is very important, as 365 Business Finance need to feel that your business generates enough cash flow to repay the funding amount.

Repayments

Traditional bank loans can have fixed monthly repayments, with a set repayment period. As these repayments are fixed, you are obligated to pay a set amount each month irrespective of underlying business performance - this can cause financial stress for your business, impacting cash flow.

A Merchant Cash Advance requires no fixed monthly repayments. Instead, there is only one, all-inclusive cost that is agreed upfront and never changes – there’s no APR, hidden fees or late penalties.

Repayments are automatically deducted from a small percentage of your card sales, meaning you only repay when customers pay you. As such, your business’ sales revenue isn’t negatively impacted.

The repayment period is typically between 6 to 10 months, however this is flexible depending on individual circumstances.

If card sales only make up a small portion of your overall business revenue, then this can impact the total amount of funding 365 Business Finance can offer you, as they only evaluate business turnover through your credit and debit card sales.

A Merchant Cash Advance with 365 Business Finance is unsecured, in that they don’t ask for any security or business plans. Therefore, they can process your application within 24 hours, offering you speedy access to capital.

Planning for Tough Times: Why a Merchant Cash Advance is Resilient in Economic Crises

365 Business Finance’s repayment structure is designed to follow the ebb and flow of your business so that your cash flow isn’t negatively impacted by factors outside of your control.

Given the importance of cash flow in times like the COVID-19 pandemic, we’ve seen how important it is for SMEs to strategically plan ahead to manage outside risk and business continuity preparation.

The approaches you take to managing cash flow today will have implications for your business in the future — no matter how uncertain times become. To make sure your financing remains viable, revisit your variable costs and outgoings regularly and consider the benefits of financial support like merchant cash advances.

For UK SMEs, a merchant cash advance has been an ideal source of business finance throughout the pandemic because:

• There are no fixed monthly payments to worry about.
• You only repay when customers pay you (so you don't have to stress during lockdowns or uncertain periods).
• It offers quick capital, with funds deposited into your account within just a few days. Even if you have taken out government loans or grants during the pandemic, is still an option to support your business.

As such, for many UK businesses, a merchant cash advance has been key in maintaining business cash flow during the pandemic – it’s an ideal funding solution for SMEs who need a ‘pick-me-up’ in tough times.

How 365 Business Finance Can Support Your Business

365 Business Finance are a financial provider able to offer merchant cash advances to small and medium-sized businesses across the United Kingdom.

A merchant cash advance is designed as a quick way for any business that accepts credit and/or debit cards to raise capital without the need for a bank loan or hefty overdraft.

Start your funding journey - get your tailored quote today.