Lendus.

Merchant cash advance

What is a merchant cash advance?

A merchant cash advance is an advance against future card takings, repaid as a fixed percentage of daily card sales rather than a fixed monthly instalment. Repayments flex with trading, so quiet weeks cost less, which suits seasonal retail and hospitality. It is priced using a factor rate, a multiplier on the advance, and a factor rate is not an APR and cannot be compared with one directly. Technically it is a purchase of receivables rather than a loan, which is why it sits outside the Consumer Credit Act.

Updated . Lendus is an introducer, not a lender.

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How it works

  1. 01 The business applies with recent card processing statements, since the advance and its size are based on average monthly card takings rather than a bank statement review alone.
  2. 02 The provider offers an advance and a factor rate, a fixed multiplier applied to the advance to set the total amount owed; for example an advance of £10,000 at a factor rate of 1.3 means £13,000 is repaid in total.
  3. 03 A fixed percentage of daily card sales is automatically deducted at source, often by the card processor, until the total amount owed is repaid in full.
  4. 04 Because repayment is a percentage of takings rather than a fixed instalment, quieter trading periods reduce what is repaid that day, and busier periods repay faster.

What lenders typically look for

What to watch for

The factor rate is not an APR and the two cannot be compared directly; a factor rate of 1.3 sounds modest but, once converted to an annualised cost based on how quickly it is actually repaid, a merchant cash advance is very often one of the most expensive forms of business finance available. Because it is structured as a purchase of future receivables rather than a loan, it also sits outside the Consumer Credit Act, meaning some of the standard protections that apply to a regulated loan do not apply here. Work out the total amount repayable in pounds and how many weeks of trading it represents before comparing it against any loan quoted as an APR.

Lenders on our panel

Lender Facility size Published rate Minimum trading
Aldermore Bank £2k–£10m 4.5%–20% 12+ months for most products
Allica Bank £25k–£15m 9.90%–13.75% 3+ years of filed accounts for unsecured business loans; 2+ years of financial accounts for commercial mortgages
Bibby Financial Services £50k–£15m 1%–3% 6+ months preferred; startups with strong order books considered
Bizcap £10k–£500k 1.5%–5% At least 4 months
Capify £4k–£500k 1.1–1.5 4+ months for merchant cash advance; 6+ months for business loan
Capital on Tap £1k–£250k 1.25%–3% 12+ months
Close Brothers £10k–£5m 5%–18% 24+ months
Cynergy Business Finance £200k–£40m Not published Not publicly stated by Cynergy Business Finance. Eligibility appears to be assessed on the strength of the underlying receivables, stock, property or other assets on a per-business basis rather than against a published minimum years-trading threshold.
Fleximize £5k–£500k 0.9%–3.9% 6+ months
Funding Circle £10k–£500k 6.9%–36% 1+ year
Investec £5k–£100m Not published Not publicly stated. Investec assesses each business individually rather than publishing a minimum trading history requirement.
iwoca £1k–£500k 2%–6% 3+ months
Kriya £50k–£1m Not published Minimum 12 months trading with at least one set of financial accounts filed for invoice finance and working capital loans. Kriya's PayLater product has a lower minimum of 3 months trading.
LendingCrowd £25k–£500k 6%–18% 24+ months
Nucleus Commercial Finance £3k–£2m 1.5%–5% 6+ months
OakNorth Bank Not published Not published No fixed minimum published; trading history is one of several factors assessed case-by-case
Paragon Bank £5k–£1m Not published Not publicly stated; assessed as part of underwriting.
Shawbrook Bank £50k–£25m 0.55%–1.25% 12+ months preferred; none required for property-backed bridging
Start Up Loans £1k–£25k 7.5%–7.5% For start-ups: no trading history required. For existing businesses: must have been trading less than 60 months
ThinCats £1m–£30m Not published Not stated as a fixed minimum number of years; ThinCats lends to established mid-sized SMEs rather than start-ups or very early-stage businesses.
Tide £1k–£500k 7.9%–49.9% 12+ months for credit products; account available from day one
White Oak UK £5k–£500k Not published Not publicly stated; assessed as part of underwriting.

As published by each lender and dated on its own page. Indicative, not offers.

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Frequently asked questions

What is a factor rate and how is it different from an APR?
A factor rate is a fixed multiplier applied to the amount advanced to calculate the total repaid; an advance of £10,000 at a factor rate of 1.3 means £13,000 is owed in total, regardless of how quickly it is repaid. An APR, by contrast, is an annualised percentage rate used on regulated loans, which accounts for the time value of money over a year. The two are calculated in fundamentally different ways and are not interchangeable or directly comparable. A factor rate that looks low can still represent a very high annualised cost once the actual repayment period is taken into account, which is easy to underestimate.
Why is a merchant cash advance not classed as a loan?
Because it is structured as a purchase: the provider buys a fixed share of the business's future card takings in exchange for an upfront advance, rather than lending a sum of money to be repaid with interest. That distinction is not just technical language. Because it is a purchase of receivables rather than credit, a merchant cash advance sits outside the Consumer Credit Act, which means some of the standard borrower protections that apply to a regulated business loan do not apply in the same way here. It is worth reading the agreement closely for exactly what obligations remain if card takings fall sharply or stop.
What happens to repayments if my sales fall?
Repayment is a fixed percentage of daily card takings, so if sales fall, the amount taken that day falls with them, which is the main appeal of the product for seasonal or unpredictable trading. It is not, however, a guarantee that repayments pause entirely or that the total owed reduces; the percentage keeps being taken from whatever card sales do come in, so a prolonged quiet period simply extends how long it takes to repay the fixed total set by the factor rate. Some providers set a minimum expected repayment period or review the arrangement if takings fall significantly below what was assessed at application.
How expensive is a merchant cash advance compared to a business loan?
Often considerably more expensive once converted to a comparable annualised basis, even though the factor rate itself can look modest. Because repayment speed varies with trading, the effective cost only becomes clear once the total repaid is measured against how many weeks or months it actually took to repay, and that effective annualised cost is very often higher than borrowers assume when they first see the factor rate quoted. It suits businesses that value speed and flexible repayment over cost, or that cannot access cheaper secured or unsecured lending, but it is worth working out the total cost in pounds before comparing it against any alternative.

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