Merchant cash advances (repayments taken from card takings) — Commercial finance explained

Summary: If your company takes card payments and needs fast working capital, a merchant cash advance (MCA) repaid as a share of your card takings can be an option. This guide explains what an MCA is, how repayments are taken from card takings, typical costs and risks, who may qualify, and practical steps to get matched to suitable MCA lenders and brokers via UK Business Loans. For a fast, no‑obligation eligibility check and quotes, start here: Get Quote Now — Free Eligibility Check.

Enquiry note: Completing our enquiry form is not an application — it’s how UK Business Loans matches your business with lenders/brokers who can provide quotes and next steps.

Disclosure: UK Business Loans acts as an introducer — we do not lend money or provide regulated financial advice. We connect businesses with lenders and brokers who will set product terms and suitability.

Table of contents

• What is a merchant cash advance (MCA)?
• How MCAs with repayments taken from card takings actually work
• Who can qualify and which industries commonly use MCAs?
• Costs, rates and how to compare
• Advantages and disadvantages
• How UK Business Loans helps
• Important legal, contractual and compliance points
• Alternatives to MCAs
• Quick checklist: Is an MCA right for your business?
• Frequently asked questions
• Conclusion & next steps

What is a merchant cash advance (MCA)?

A merchant cash advance (MCA) is a lump‑sum advance of working capital that a business repays using a percentage of future card takings (or other card processing receipts). Unlike a conventional loan with fixed monthly payments and an interest rate, MCAs use a factor rate or a revenue‑share model: you repay a fixed multiple of the advance out of daily/weekly card sales until the total amount is repaid.

Key difference vs a business loan:

• Repayments are revenue‑based (a percentage of card takings) rather than a fixed monthly instalment.
• Repayment term varies depending on your sales volume — faster when takings are high, slower when they fall.

Quick numeric example: borrow £20,000 with a factor of 1.25 = total repayable £25,000. If the agreed remittance is 12% of card takings, the time to repay depends directly on daily card revenues.

How MCAs with repayments taken from card takings actually work

Advance, holdback and the remittance process

Basic steps:

1. A lender or merchant advance provider approves the MCA based on your recent card takings and business profile.
2. You receive an advance (e.g., £20,000).
3. An agreed holdback or remittance percentage is set (for example 10–20% of daily card takings) or automated deductions are implemented through your card processor.
4. Each day or week the processor or a third party takes the remittance from your card receipts and sends it to the MCA provider until the agreed multiple (factor) of the advance is repaid.

Two common repayment methods

• Automated deduction via card processor: daily or weekly transfers are taken before funds reach your bank account (processor integration).
• Fixed percentage of card takings: a rolling holdback (e.g., 12% of card takings) is taken until the advance plus fees is repaid. Payments vary with sales volumes.

Timing and variability — slow vs busy periods

MCAs are variable: in busy periods you’ll repay faster (higher daily remittances), in quiet periods remittances fall in line with takings — which can preserve immediate cashflow but extend the time you carry the facility. Importantly, the total repayable (the factor) does not reduce simply because payments are slower, unless an early settlement discount is offered.

Who can qualify and which industries commonly use MCAs?

MCAs are typically used by companies (limited companies and trading businesses) with consistent card revenue streams. Lenders look for predictable card receipts rather than perfect credit histories.

Common sectors:

• Hospitality: pubs, restaurants, cafés
• Retail and high‑street stores
• E‑commerce merchants with steady card volumes
• Leisure and events (seasonal businesses)
• Fuel/petrol forecourts and convenience stores

Typical eligibility signals:

• Consistent card takings over recent months
• Trading history (many providers ask for at least 6–12 months)
• Average weekly/monthly card revenue above provider thresholds (varies)

Note: some sectors with high chargeback, fraud or regulatory risk may be treated cautiously (e.g., gambling, adult services).

Costs, rates and how to compare

MCAs use different pricing language than loans. Key terms you’ll see:

• Factor rate: a multiplier (e.g., 1.2–1.5) applied to the advance to give total repayable. Factor 1.25 on £20,000 → repay £25,000.
• Holdback/remittance percentage: the share of daily card takings collected (e.g., 10–20%).
• Fees: origination, setup, processor integration, servicing or early settlement adjustments.

Why APR comparisons can be misleading: factor rates and revenue‑share models don’t map cleanly to APR because the repayment period varies with sales. Instead compare:

• Total repayable amount (exact £ figure)
• Typical time to repay based on your sales
• Daily/weekly cashflow impact (percentage of takings)
• Any additional fees and early settlement terms

Advantages and disadvantages

Advantages

• Very fast access to cash — decisions and funding can be same‑day to a few days.
• Repayments flex with sales — remittance falls in slow periods, helping short‑term cashflow.
• Often available to businesses that struggle with conventional bank lending criteria.
• Useful for seasonal businesses needing short bursts of working capital.

Disadvantages

• Higher effective cost than many traditional business loans.
• Daily or weekly remittance can strain cashflow during busy stock or payroll periods.
• May require changes to card processing arrangements or introduction of a third‑party processor.
• Not suitable if you lack stable card volumes or need long‑term lower‑cost funding.

Cashflow planning tip: model the daily remittance against your peak and trough weeks (or ask your accountant) before agreeing to ensure operational needs remain covered.

How UK Business Loans helps: matching you to the right MCA provider

UK Business Loans does not lend. We are an introducer that connects businesses with a panel of lenders and brokers experienced in merchant cash advances and payment‑linked finance. Our service is free and no obligation.

What we do:

• Collect a short set of business details (two minutes).
• Match you to lenders/brokers most likely to provide a suitable MCA solution for your sector and card volumes.
• Share your enquiry with selected partners who will contact you directly with quotes and terms.

Speed: many matches produce responses within hours during business days. Start your free eligibility check now: Get Quote Now.

Related reading: if you want to explore broader options within commercial finance, see our page on commercial finance.

Important legal, contractual and compliance points to check before agreeing

• Obtain written terms showing the advance, total repayable, remittance percentage, fees, and any processor arrangements.
• Check early settlement rules — is there a discount or penalty?
• Confirm who manages processor integration and whether your existing merchant agreement changes.
• Clarify responsibility for chargebacks and declines — does the remittance continue regardless?
• For larger advances, consider a professional review (accountant or commercial lawyer).

Reminder: UK Business Loans is an introducer — lenders and brokers set terms and suitability. Always read financial promotions and full contract terms carefully.

Alternatives to MCAs

• Traditional business loans — lower cost for businesses with strong credit and security.
• Overdrafts — flexible short-term working capital, if available from your bank.
• Invoice finance — unlock cash from outstanding invoices rather than card takings.
• Asset finance — fund equipment purchases with repayment tied to the asset.
• Merchant loans with fixed monthly repayments — predictable costs that don’t vary with takings.

When to choose an alternative: if you need lower long‑term cost, predictable monthly payments, or you don’t have reliable card volumes, an alternative may be better.

Quick checklist: Is an MCA right for your business?

• Do you have stable, regular card takings? ✓
• Is your immediate need short‑term working capital rather than long‑term borrowing? ✓
• Can your business cope with a daily/weekly remittance? ✓
• Are you prepared to accept higher overall cost in exchange for speed and flexibility? ✓
• If you answered yes to these, consider getting matched for quotes: Free Eligibility Check — Get Quote Now.

Frequently asked questions

Start your free eligibility check — Get Quote Now

Conclusion & next steps

Merchant cash advances repaid from card takings can provide very fast working capital with repayments that flex to your sales. They suit businesses with reliable card volumes that need short‑term cash, but they carry higher effective costs than many traditional loans. To compare options and get tailored quotes, complete a short, no‑obligation enquiry and we’ll match you with experienced lenders and brokers: Get Quote Now — Free Eligibility Check.

1. What is a merchant cash advance (MCA) and how are repayments taken from card takings?
An MCA is a lump-sum advance repaid by taking a fixed percentage (remittance/holdback) of your daily or weekly card takings until a pre-agreed total (factor rate) is repaid.

2. Who can qualify for an MCA and which industries commonly use them?
Businesses with consistent card volumes—such as hospitality, retail, e-commerce, leisure and convenience stores—are most likely to qualify even if they struggle to secure traditional bank loans.

3. How much does an MCA cost and what is a factor rate?
MCA costs are expressed as a factor rate (e.g., 1.2–1.5) giving the total repayable rather than a conventional APR, plus any origination or processing fees, so compare the total repayable amount and fees in writing.

4. How quickly can I receive funds from an MCA?
Many MCA providers can approve and fund within 24–72 hours, depending on underwriting and documentation.

5. Will taking an MCA affect my business or personal credit score?
MCAs are commercial products and many providers do not report to personal credit agencies, but some may perform personal checks or require guarantees, so confirm with the lender.

6. Are merchant cash advances regulated in the UK and what should I check?
MCAs are commercial finance products—not consumer regulated credit—so always request clear written terms, full cost schedules, and confirm any regulatory status with the lender or broker.

7. Can I settle an MCA early and will I get a discount?
Some providers offer early settlement discounts while others may levy penalties, so insist on an exact early-settlement calculation in writing before accepting terms.

8. What happens if my card takings fall sharply—will repayments change?
Remittances typically fall with card takings (extending the repayment term), but the total repayable usually remains the agreed factor unless the provider offers alternative arrangements for downturns.

9. How does UK Business Loans help me get an MCA and is completing the enquiry form an application?
UK Business Loans is a free introducer that matches your short enquiry to suitable lenders and brokers—completing the form is not an application but a no‑obligation way to receive quotes and eligibility feedback.

10. How should I compare MCA offers and what documentation should I ask lenders for?
Compare total repayable, typical time-to-repay based on your sales, daily/weekly remittance impact, all fees, processor integration details and an itemised repayment schedule in writing before deciding.