Running a business comes in many different shapes and forms, so why shouldn’t finance options be the same?

Businesses often require finance to scale or to keep operations running. Many seek the help of securing a traditional loan, but this option sometimes can come with challenges so business owners seek alternative routes.

One of these that we can support on at Johnston Financial Solutions is a Merchant Cash Advance.

 What is Merchant Cash Advance?

A merchant cash advance is a short-term funding option in which a business gets a fixed payment upfront from a financing provider/lender, which is then typically repaid using a percentage of daily or weekly credit or debit card sales that the business makes.

A lender will continue to take a percentage of daily card sales, plus potential interest and/or a fee, until the funding your business has received has been repaid. Note that with a Merchant cash advance there are no fixed terms, the repayment rate is usually estimated based on your businesses sales history.

How is a Merchant Cash Advance different to a business loan?

With a business loan, most banks will require a detailed business plan prior to loan approval which most of the time is not required for a Merchant Cash Advance. A business loan is usually secured against your company or personal assets, whereas a merchant cash advance is based on a percentage of your future business revenue.

Advantages of a Merchant Cash Advance

  • A quicker option for securing finance for your business. No need for legal processes or valuations.
  • Less paperwork and documentation required than applying for a loan
  • Repayment costs are agreed up front

 Disadvantages of a Merchant Cash Advance

  • A Merchant Cash Advance is based directly on card sales made through a card terminal. If your business typically uses cash payments, bank transfers or other online payment methods for most of your sales then this option may not be the best fit for your business.
  • The borrowing limit for merchant cash advances is typically lower than compared to a bank loan. If you are seeking a large financial sum, a business loan may be a better suited option.


Case Study 

Here’s some real-life examples of businesses that have availed of Merchant Cash Advance to support their business.

Case Study #1

After 2 months, a Retailer was unable to complete a loan with their Bank as the charge holders on their property could not agree a way forward. The business was in the middle of a renovation and sales were being badly impacted. The business was apply to use a Merchant Cash Advance, which was approved within days that allowed the business to complete their renovation and make shopping much easier for their customers.

Case Study #2

One of our clients at Johnston Financial Solutions, an Online retailer, had a short-term Cashflow issue due to supply chain issues and seasonal aspects of the business. Within one day, the business was able to arrange Cashflow Funding through a Merchant Cash Advance that took it through to the more profitable part of the year.

Case study #3

A retailer had taken on a new site and wanted to purchase a licence for Off Sales. Their Bank process would have involved a legal process and valuations that would both take time and prove costly. Using a Merchant Cash Advance, the business was able to purchase the licence they needed and benefit from the additional sales straight away.


How do I apply?

If you are interested in applying for a Merchant Cash Advance, we would first recommend that you speak with your credit broker for more information and to find out initially, if this is a viable option for your business. You can book a call with Mark to find out more about Merchant Cash Advance.

The application process will usually involve the following steps.

  • Calculate the amount you wish to borrow and be realistic about what you can afford to repay each month.
  • Request a quote from a business that specialises in Merchant Cash Advance, the average information that a business will look for is contact information, number of years of trading, and a current average of monthly credit card sales.
  • Once the lender has everything required, you will agree the loan amount and agree on the monthly repayment amount.
  • Once the agreement has been finalised the lender will begin to collect a fixed percentage from your car transactions automatically each month.

About Johnston Financial Solutions Limited

Johnston Financial Solutions is an independent credit broker of commercial finance in Northern Ireland. Improving access to finance from a diverse range of alternative funders such as mainstream banks, challenger banks, pension funders, and peer-to-peer lenders. Book a call with Mark today to find out more.