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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
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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
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