There’s more than one way to get your hands on some much-needed cash. A merchant cash advance, is a good way for any company to get money in a way that isn’t a traditional loan. If that sounds like it could help you, read on to find out how much a merchant cash advance will cost.
What is a Merchant Cash Advance?
Okay, so let’s talk about what a merchant cash advance actually is to make sure we’re all on the same page.
When you approach this type of loan from the perspective of a cursory glance, it looks a lot like most other loans that are unsecured. But, it’s a bit different. A merchant cash advance isn’t a loan, but instead, you’re putting up the revenue from future card transactions for a price. It is an innovative product that is relatively new on the market, and it has proven very popular with the retail and leisure sectors. The lender will provide you with a sum of money which you will then pay back in installments through a percentage of your customer card payments. The repayment is a percentage amount from each card payment, so it will remain in line with your revenue. The more you earn on your card payments, the more you can pay back and clear your loan.
So how much does a merchant cash advance cost? Your repayments will be a certain percentage of your card takings. If you’ve not got a card machine, this isn’t your loan.
Fighting out repayment costs can get a bit tricky, so let’s take a look at a basic example to make sure you understand. On average, you’ll pay back anywhere from 5-25% of your daily transactions for a merchant cash advance.
So, let’s look at a basic example. Let’s say for a moment that you make £10,000 each month, and you want to borrow £10,000. Basically, you want a month’s earnings. The provider will give you that loan, but the cost will be a funding fee of £,4000.
So, what you’re paying is £14,000 overall. But you’ll do this by paying for £20% of your payments each month, which is £2,000. So, let’s do the maths together.
£14,000 / £2,000 = 7 months of payments.
The APR for your loan will be more than 120%, but assuming you can pay £2,000 each month, you’ll be done with the loan and it’s interest in 7 months.
Finding the Best Rates
So as you can tell, merchant funding can get pretty expensive if you’re not careful. That’s why you need the best repayment rates – yeah, you might have to pay it back a little longer, but the cost each month will go down. Here at Funding Bay, we’ll work with you to give you the best results and make sure you’re suitable for your loan.
Getting the best rates will be key to your merchant cash advance. It’s a good way to cash into your business quickly, but such a massive loan can come with its fair share of things to consider. This is not meant to dissuade you, but to make you stop and consider all of the different options that are available.
Funding Bay work with a roster of lenders who provide merchant cash advances, including; Nucleus, 365 Business Finance, Capify, Merchant Money to name just a few. Each lender offers slightly different terms and rates. Funding Bay can help match your business with the most suited provider for your needs.
Find out more here.
4 Benefits of a Merchant Cash Advance