How do repayments work for merchant cash advances?

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Home » Business Finance » How do repayments work for merchant cash advances?

With the application process of applying and being approved for a merchant cash advance being so quick, many rumours begin to circulate surrounding the validity of these types of ‘quick cash’ loans.

We are here to dispel some of these myths by explaining the facts surrounding these types of business loans. After all, there is a reason that merchant cash advances are quickly becoming one of the most sought after types of small business loan in the UK.

One of the main reasons business owners worry about taking out a loan is the inclusion of fixed repayment schedules that can be difficult to stick to, especially for businesses that fluctuate in their monthly profits. Hospitality businesses experience this the most with a lot of their business being seasonal.

How do merchant cash advance repayments work?

Repayment programmes for merchant cash advances work differently to your average small business loan. When you secure a traditional loan from your bank you receive fixed rate payments and a fixed interest until you have paid back the loan.

This poses problems for businesses that don’t receive similar profits month to month. When a company has to pay fixed amounts each month it makes it easier to account for but a quiet month could see cash flow dry up, making it more difficult to pay for other important aspects of the business.

With a cash advance, repayments are flexible; businesses pay a percentage of their monthly credit card takings rather than a fixed amount. This means that however profits differ month to month, the business only ever pays a percentage of what they earn, meaning they always have cash flow left over.

Use Quote Goat today to compare merchant cash advances across UK lenders so you can find the right option for you.