January 27, 2026

What is

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What is a Merchant cash advance, how repayments work, and who it suits

Understand how a merchant cash advance works in the UK, how the holdback and factor rate impact repayments, and whether MCA funding fits your cash flow.

James Laden

Co-founder and CEO

If you take card payments and need fast working capital, a Merchant Cash Advance, MCA, could help. In this guide you will learn what an MCA is, how the holdback and factor rate shape repayments, and who gets the most value from it. If you want to compare offers, see our merchant cash advance options.

Quick take, what a Merchant Cash Advance actually is

An MCA is not a loan, it is a purchase of future card sales. A funder advances a lump sum to your business. You repay by giving them a fixed percentage of your daily or weekly card takings until you reach a set total payback. For a plain-English overview, see the British Business Bank guide.

Speed: approval and funding can happen in 24 to 48 hours.
Unsecured: no property or equipment as collateral, see GOV.UK overview.
Typical size: roughly one to two times your average monthly card sales.

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Graphic, MCA flow: Card sales enter your merchant account. A 12 percent holdback routes to the funder. The rest lands in your bank account. Labels show “Daily Card Sales”, “Holdback to Lender”, and “Net to Business”.

MCA Flow - Daily Card Sales Split

This visual explains that repayments flex with card takings while the total payback stays fixed.

Key terms, translated

Advance amount: the cash you receive upfront.
Holdback percentage, retrieval rate: the slice of daily card sales taken, for example 10 percent to 20 percent.
Factor rate, fixed fee: used to set the total payback, for example a 1.30 factor on £10,000 means you repay £13,000 in total. See this factor rate explainer.
Estimated term: how long it should take to clear the balance, driven by your sales, not a fixed date.
Early settlement: you can clear the balance, but most deals do not give a discount because the fee is fixed.

How repayments work, day by day

Repayments happen automatically. Your card processor splits a set percentage of your takings and sends it to the funder. You pay more on busy days, and less on slow days. There is no fixed monthly payment, which protects cash flow when trade dips.

Example A, steady revenue

Average card sales per day: £2,000
Holdback: 12 percent
Daily repayment: £240

Example B, slow week

Average card sales per day: £800
Holdback: 12 percent
Daily repayment: £96

Why this matters: the payment flexes with sales, which helps cash flow in quiet periods; the total payback stays the same, so slower sales push the finish date out.

Want tailored numbers based on your actual card volume? Compare MCA offers.

Graphic, repayment examples: Two mini charts. Week A, average daily sales £2,000 with £240 daily repayment. Week B, average daily sales £800 with £96 daily repayment. Same 12 percent holdback. Caption notes that slower sales extend the time to clear.

Repayment Examples - Steady vs Slow Week

What MCA really costs, in plain English

Instead of an interest rate, most MCAs use a factor rate or fixed fee. This sets a total payback on day one. The faster you repay, the higher the implied APR looks. The slower you repay, the lower the implied APR looks. For clear decisions, focus on pounds in and pounds out. You can also read a neutral overview of cost and eligibility here, Access PaySuite explainer.

Total payback in pounds.
Expected time to repay at your current sales.
Any admin or broker fees.
Early settlement policy and any discount, if offered.

Graphic, cost at a glance: A simple bar shows £10,000 advance versus £13,000 total payback. The £3,000 difference is the fixed fee set by the factor rate.

MCA Cost at a Glance

Who MCA suits, and who should avoid it

Good fit:

Card-heavy businesses, for example restaurants, salons, retail, and e-commerce using Stripe or similar.
Seasonal firms that need to stock up before a peak.
Clear short ROI uses, like inventory buys, ad campaigns, or emergency repairs.

Bad fit:

Very thin margins where a daily holdback hurts.
Businesses already juggling several repayments.
Unstable sales and no buffer for slow weeks.

If you are card-heavy and want flexible repayments, view MCA offers or review the best MCA lenders.

Common use cases that lenders like

Buying stock for a seasonal rush.
Marketing spend with a short payback window.
Emergency equipment repair that protects revenue.
Hiring temporary staff for peak periods.

MCA vs alternatives, a simple comparison

Product	Speed	Repayment style	Best for	Main risk
Merchant Cash Advance	Same week	% of daily card sales	Card-heavy, seasonal cash flow	High total cost
Short-term loan	Fast	Fixed daily or monthly amount	Predictable revenue	Strain if sales drop
Revolving credit	Fast once set up	Only pay on what you draw	Ongoing, flexible needs	Variable interest cost
Invoice finance	Fast after onboarding	Advance against invoices	B2B firms on terms	Fees plus service tie-ins

Not sure MCA is the right fit? Compare revolving credit, term loans, or invoice finance.

Graphic, comparison: A simple matrix shows Speed, Repayment style, Best for, and Main risk across MCA, Short-term loan, Revolving credit, and Invoice finance.

MCA vs Alternatives - Speed Comparison

Quick eligibility check

Process at least £5,000 per month in card payments.
Trading for 3 to 6 months or more.
Sales vary by week or season.
Need cash within 24 to 72 hours.

Worked examples, total payback and timeline

Example 1: You take a £10,000 advance at a 1.30 factor. Your total payback is £13,000. With a 12 percent holdback, here is how the finish date shifts:

Average daily card sales £2,000, daily repayment £240, rough completion in about 54 business days.
Average daily card sales £1,200, daily repayment £144, rough completion in about 90 business days.
Average daily card sales £800, daily repayment £96, rough completion in about 135 business days.

These are estimates, not guarantees. Actual time depends on real sales and any fees.

Graphic, timeline estimator: A small line shows estimated months to clear £13,000 at a 12 percent holdback. Daily sales at £800, £1,200, and £2,000 yield about 6.5, 4.0, and 2.7 months.

Timeline Estimator by Sales Level

Red flags and questions to ask before you sign

What is the total payback in pounds?
What holdback percentage are we agreeing to?
What happens if our card processor changes?
Is there an early settlement discount, yes or no?
List every fee, admin, broker, and legal.
Is there a personal guarantee?
Are you stacking advances, and what is the impact?

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Next steps, compare offers and check your rate

Want to see live options based on your card sales? Start here, compare merchant cash advance providers. Or view our guide to the best MCA lenders. If MCA is not a match, check revolving credit, term loans, or working capital loans. You can also speak with our team or start an application.

Important disclaimer

MCAs can be the most expensive type of business finance. If you qualify for a cheaper product, like a bank or term loan, explore that first. This guide is for information only, not advice.

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