www.accessfunds.co.uk

An Guide to Merchant Cash Advances

MCA SHORT TERM FUNDING

flexible solutions for your business needs

accessfunds

CONTENTS

Introduction

Merchant Cash Advances

Tips for Retail Business

About Us

SME Guide to Business Funding

Welcome to our Series of Alternative Finance Tips

In recent articles, we have commented on many aspects of raising funds, and have collated that information here into a series of easy-to-read guides. For more detail visit our blog.

We see a wide range of applicants from all kinds of indus-tries looking for anything from a quick cash injection, a property development fund or even long term restructuring finance. No two cases are the same, and the choice of products and lenders can make the sourcing of appropriate funding seem far more complex than it is.

Applying to an alternative lender is different from approaching your bank, and using a broker should make the journey easier, and hopefully quicker too.

Here are our tips that will hopefully help you gain the business funding you need.

Jan M Stefanowicz Director Faseo Limited

www.accessfunds.co.uk

flexible solutions for your business needs

MERCHANT CASH

ADVANCES

Raising finance is no longer the tough process of going

cap in hand – and business plan in hand – to your bank.

Generating capital should be quick and easy, so you can

get back to doing what you do best – running your busi-

ness.

Merchant Cash Advances

If you are a retailer, restaurant, bar or club that takes

credit and debit cards—then a Merchant Cash Advance

may provide access to short term funds quickly.

MCA’s are effectively factor-based advances, calculated

on anticipated future credit card transactions.

So long as the business (typically a high card turn-over re-

tailer/restaurant) can demonstrate a track record of at

least 6 months of sustained card sales, the lenders will

buy future transactions at discount, for a one-time fee.

The repayments are proportionate to ongoing sales, mak-

ing the budgeting of the facility very simple. Usually the

schedule is calculated so that the debt is repaid in 6-9

months. Poor credit history can be accepted – with loans

starting as low as £2,000. Underwriting is relatively mini-

mal, as the focus is on the sales and not the balance sheet

of the business.

Benefits of a Merchant Cash Advance

Advances can be up to 150% of your monthly card sales turnover

Daily Payments are automatically taken as a % of card settlement

Only pay as you make sales – there is no fixed instalment

Adverse credit record accepted

Minimal underwriting

Funds released quickly

A personal guarantee from the business principals is required

flexible solutions for your business needs

A Merchant Cash Advance (MCA) is fast becoming a

FLEXIBLE way for retail businesses to access funds. If you

have been trading for at least 6 months and have built up

strong credit/debit card sales volumes, you can benefit

from funding that is quick and simple to obtain. And there

is no need to change banks or acquirers!

How it Works—An MCA allows you to raise capital for

your business by selling the anticipated future card sales

for a ‘discount’. The maximum advance you can get is gen-

erally equivalent to between 100-150% of the average

monthly turnover you put through your card machine. So

long as you are turning over an average of £2,000 a

month in card sales, you should be accepted.

Discount Fees—It is always important to understand how

much discount you are paying for a facility. In this repre-

sentative example we are discounting a future transaction

value calculated at £30,000:

Amount of funding Agreed: £30,000

Future Discount 20%: £6,000

Advance Received: £24,000

Repayment Plan—You agree from the outset to give a

percentage (set between 10%-20%) of every future debit/

credit card sale towards repaying the agreed amount of

funding before discount. The simplicity of this product is

that you repay at the pace your business trades. Because

repayments rise and fall with your sales, you’ll never need

to worry about being short at the end of the month.

No Security Required—This is a completely unsecured fa-

cility, though most lenders will ask for a personal guaran-

tee from the business owner.

Credit Scores—A Merchant Cash Advance is based on

your business’s trading record and your anticipated ability

to repay as illustrated by your debit/credit card sales.

flexible solutions for your business needs

MERCHANT CASH

ADVANCES

GENERAL TIPS FOR

RETAIL BUSINESSES

Ensure Customers Pay – Encouraging your customers to

pay in a timely manner is no less important than selling

them the goods or services in the first place. Keep billing

times short – as your major suppliers may do to you.

Many businesses are generous with terms to their clients,

while being harshly treated by their own suppliers.

Reward the Sales Team for ROI – This might seem more

like a sales management tip than cash flow, but aligning

the goals set for your salespeople with your cash flow

plan will simplify cash management issues. They will hone

their sales skills and earn a bonus from your increased

gross profit.

Join Trade Associations and local retail community

groups. It’s important to know what your fellow retailers

are doing in the community and what benefits may be

available. There are many millions of unused grant funds

each year because businesses don’t know it’s available!

Schedule and Predict Demands – Budgeting is important.

Separate your semi-fixed costs from the variable costs

that may be driven by seasonality. Ensure that cash is allo-

cated for stock or tax demands based upon sales turnover.

Having a line of credit available is useful as a ‘Plan B’, if an

unforeseen opportunity or eventuality presents itself.

Allocate for Big Purchases – Finding the right time to

make large capital expenditure can be tough. Figure the

amount you will need and build it into your budget and

forecast. This gives you an overview of your capital spend-

ing and can help determine if you are spending appropri-

ately for your business income. Many readily available fi-

nance products are available today to help spread the cost

of growth and expansion, without depleting your cash.

flexible solutions for your business needs

MCA

PLANNING

YOUR APPLICATION

Know what you need and why - Make sure you are able

to explain clearly why you need funds, and how it will

bring value to the business.

Merchant Acquirer Statements - The MCA lender will

want at a minimum to have copies of your last 6 months

of debit and credit card statements. Quite often, particu-

larly f your business is seasonal, they may ask for a wider

window of 12 months.

Bank Statements - The lender may want to see the last 3

months of business bank statements.

KYC - As with all transactions you will need to provide

your photo ID (usually minimum 2 directors/controlling

shareholders).

And that’s pretty much it!

Depending on the amounts involved the funder may ask

for some further financial documentation, or arrange a

site visit to meet you, and understand the business first-

hand.

The lender will ask you to complete a release form so that

they may obtain agreement from the acquirer to directly

settle a percentage of your sales once the facility is set up.

Because you are not on a fixed instalment, and the lender

is being serviced daily, the underwriting process is far sim-

pler than a traditional loan. Security is not taken, though a

personal guarantee will be required. Should the business

or directors have impaired credit, this is less likely to act

negatively in obtaining an MCA facility.

We recommend that you take independent legal advice before

entering any credit agreement

flexible solutions for your business needs

Faseo Limited accessfunds

Contact:

Web: www.accessfunds.co.uk

Voice: 01295 713627

Apply

As a fully independent broker, dealing with unregulat-ed AND regulated business borrowing, we have a com-prehensive understanding of lending and work with a number of top funders. Based in the Midlands, we cater to the entire UK busi-ness community. Most of our clients are small busi-ness owners, property investors and local or regional entrepreneurs. We work with any business that has typically traded for a year or longer. There are many more choices available now in terms of products and lending sources, and we are here to help guide you through the maze, and find the right funding vehicle to meet your needs. We place “life-long relationships” at the core of our values, so with us in your corner, you will have access to someone who wants to listen and act on your behalf. We are a broker not a lender. We recommend that you take independent legal ad-vice before entering any credit agreement © Faseo Limited 2017

accessfunds is a trading name of Faseo Limited. Company Number: 05515322 Data Protection (ICO): ZA207099 Registered Office: Carlton House, 5 High Street, Higham Ferrers, Northamptonshire, NN10 8BW Authorised and regulated by the Financial Conduct Authority Firm reference number: 766217 accessfunds is authorised and regulated by the FCA in respect of con-

sumer credit broking activity

Broking to limited companies, incorporated partnerships and unin-

corporated partnerships of three or more is not regulated by the FCA

flexible solutions for your business needs