backed
Start a funding enquiry

Guide

Merchant cash advance explained

Common in hospitality, retail and salons: you take an advance now and repay it as a slice of every card transaction until it clears. No fixed monthly payment, no set end date.

How repayment works

You agree an advance amount, a total repayable, and a holdback — the percentage of daily card takings that goes to the funder. The provider collects it automatically through your card processor, so repayment tracks trade instead of the calendar.

  • Advance: £30,000
  • Factor rate: 1.3, so £39,000 repayable in total
  • Holdback: 12% of daily card takings
  • The repayment period would depend on actual card takings

Where it fits

  • Seasonal businesses that cannot commit to a fixed repayment in a quiet month.
  • Refits, equipment or stock ahead of a busy period.
  • Businesses with strong takings but a thin or blemished credit file.
  • Situations where repayments linked to card takings match the company's cash-flow pattern.

Where it does not

If most of your revenue arrives by bank transfer or invoice rather than card, there is nothing for the holdback to attach to. And if the business can comfortably support a fixed monthly payment, it may also compare fixed-payment structures. Pricing is set by each provider.

Questions worth asking before you sign

  • What is the total amount repayable, in pounds, not as a rate?
  • Is there any discount for clearing it early, or is the total fixed?
  • Can the holdback percentage change during the term?
  • Are there fees on top of the factor rate?
  • Is a personal guarantee required?

Common questions

What is a merchant cash advance?
An advance repaid as an agreed percentage of your future card takings rather than in fixed monthly instalments. Busy weeks repay faster, quiet weeks repay less.
How much does a merchant cash advance cost?
Providers may quote a factor rate rather than an interest rate. For illustration only, a £30,000 advance at a factor of 1.3 would mean £39,000 repaid before any separate charges. Actual pricing is set by the provider.
Who qualifies for an MCA in the UK?
Providers generally look for regular card payments and enough processing history to assess trading. Minimum takings and other criteria vary by provider, and credit information may still be considered.
Is an MCA cheaper than a business loan?
The structures are different and cannot be compared by headline rate alone. Compare total repayable, fees, repayment mechanism, term and contractual obligations for any offers received.

Tell us what your company needs to fund

Backed may introduce your company to one or more funding partners whose criteria may fit. Providers determine eligibility, approval, pricing and terms.

Submit a funding enquiry

Related guides