What is an MCA loan?

MCAMerchant Cash Advance is a business loan. Businesses across the UK can access flexible funding, quickly. You, the business owner, can release funding against previous and future card sales. However, before we delve into how merchant cash advance (MCA for short) can benefit your small business, you’ll need to know how it works. It’s one of the fastest-growing forms of financing a small business in Bristol and the UK. This is because it’s a quick and flexible business loan. Especially if you are a new start business or one that has historically found it challenging to secure business finance.

Whether it was using a commercial finance broker like ourselves or a merchant cash advance company direct. This type of loans are a brilliant way of sourcing commercial finance on the same day. Or if you are completely new to a merchant cash advance, the same week. It gives the business owner a clear and easy repayment structure on the business loan amount. One prerequisite to a merchant cash advance is that you take card payments. Most small businesses must take card payments. Especially with Covid bringing in tighter restrictions on cash payments. So, if you take card payments and are looking for an easy business loan, then a merchant cash advance could be the solution for you.

Why is merchant cash advance popular with bars and restaurants in Bristol?

Hospitality businesses in Bristol and across the UK were heavily impacted by Covid. Lockdown restrictions hindered revenue for bars and restaurants in Bristol. They had to diversify into new income streams such as online delivery. The consequence of this was card payments increased through card machines and online payment gateways. This meant that card payment was more important than ever. Since mid-2020 card payments have soared and therefore merchant cash advance has followed. If you own a restaurant, bar, pub or are involved in the hospitality sector MCA loans can really benefit you. With sales fluctuating month by month merchant cash advance keeps cash flow strong.

This is because when you take more card payments per day the quicker you repay the merchant cash advance business loan. When you take less, you repay less of the MCA loan. The reason being is you repay a daily percentage of card sales, called ‘the daily sweep of card repayments’. Pinnacle Finance the commercial finance brokers in Bristol will work with you to find a solution that fits your business.

Unleash the power of Merchant Cash Advance

MCA loans can be an incredibly quick and flexible way of funding a B2C (Business to Customer) business. As it takes an average of previous merchant card sales and based on this provides a loan amount. It allows you, the business owners, to access a greater loan amount with the flexibility of repayments. It controls cash flow as you are merely repaying the loan from the transactions taken and mitigates you from getting behind with payments. When business is booming as a result of the merchant cash advance loan you can repay the loan quicker. Thus, reducing the interest paid on the loan and making it a very cost-effective way of borrowing.

Hopefully, you are now getting a feel for how powerful merchant cash advances loans can be and the impact this could have on your business. If you are needing a loan for recruitment, business premises expansion, or general cash flow this could be the solution for you.

How much can I get through a loan?

The amount you can borrow through MCA loans will be dependent on the amount and type of card transactions you take. You could be an e-commerce business trading on eBay and Amazon. These types of businesses generally attract high turnover and lower profit margins. Traditionally it can be difficult to access commercial finance as a consequence. Merchant cash advance cuts through this noise.

It will track the payments through the payment platform you are using. The deposits into the business account and how frequently will be a factor for the merchant cash advance loan provider. This is because the MCA loan provider will collect payment daily from sales. Thus, keeping cash-flow strong so you don’t have lump-sum payments each month. As an average, if you take 1 to 1.5 times monthly card sales, this will give the loan amount. Of course, this can be increased or decreased depending on the business sector, business credit, and other lending factors.

What is the cost of an MCA loan?

Traditionally a business loan will carry an interest rate, as a result, will be levied on the loan amount. However, a merchant cash advance is repaid differently, mainly due to the flexibility of the loan. It’s charged at a factor rate and sweep rate, which simply means the rate at which the loan will be repaid. The lender will work out how long it will take for the business to repay the merchant cash advance loan.

It can fluctuate if sales increase or decrease. Presuming you invest the money into the business and increase sales. This will reduce the time at which the business loan is outstanding. Resulting in cheaper loan borrowing. Hopefully, you can start to get a feel for how this type of commercial finance works. As the MCA loan providers get confident with you using the facility, they top-up the funding. So as your business grows, so does the funding. It’s like having an investor behind you. If you feel it could benefit your business or want to know a little more get in touch with one of the teams at Pinnacle.