Merchant cash advance: funding repaid from your card sales

How does a merchant cash advance work?

A provider looks at your recent card and EFTPOS settlements, offers a lump sum, and agrees a fixed total amount to be repaid. Repayment happens automatically: an agreed share of your card takings is collected each day or week until the total is paid.

Because repayments are a share of sales, a strong Saturday repays more than a wet Tuesday. That flexibility is the main appeal. There’s no property involved; the advance is backed by your future card receipts.

Who does a merchant cash advance suit?

Businesses where card payments are a large and reliable share of income:

• cafés, restaurants, bars and takeaway shops;
• independent retailers and boutiques;
• hair, beauty and wellness salons;
• gyms and studios with card memberships;
• tourism and hospitality businesses with seasonal peaks.

It suits businesses that want repayments to breathe with their trade. A café that doubles its takings in summer and halves them in winter might find a flat weekly loan repayment stressful in July. A share-of-sales structure moves with the season.

How does it compare with an unsecured loan?

	Merchant cash advance	Unsecured business loan
Sized on	Card takings	Total business deposits
Repayment	Share of card sales	Fixed instalment
Cost structure	Fixed total repayable, agreed upfront	Cost of finance over the term
Early repayment	Usually no saving	May save, depending on terms
Suits	Card-heavy, seasonal businesses	Most trading businesses

The fixed-total structure matters. With many loans, repaying early can reduce the total cost. With a merchant cash advance, the total is usually fixed regardless of how quickly you repay. Compare the total repayable across options, not just the size of each deduction.

We don’t publish rates or factor figures because every facility is priced on individual circumstances. What we will do is lay out the total cost of each option side by side before you choose. If you’d like that comparison, start with a 60-second enquiry.

What will the provider look at?

• Card settlement history, usually the last several months.
• Consistency of card takings through the week and across seasons.
• Time trading at the current location.
• Existing advances, because multiple share-of-sales deductions can overlap.
• Your lease, particularly how long you’ll be trading from the site.

A business whose card volume has grown steadily is in a stronger position than one whose volume has fallen, even if both have the same average.

When should you be cautious?

Merchant cash advances are useful tools, but they have traps:

1. Stacking. Taking a second advance before the first is repaid means two deductions from the same takings. Cash flow can tighten fast. Our page on existing debts and stacking explains why many lenders decline stacked files.
2. Using it for ongoing losses. An advance smooths timing; it doesn’t fix a business that’s losing money.
3. Comparing only on the daily deduction. A small daily figure can hide a large total cost.
4. Ignoring the lease. If your lease ends before the advance is repaid, sort out the renewal first.

What do businesses typically use it for?

• stock before a busy season (see stock and inventory funding);
• a refurbishment that lifts trade;
• equipment replacement when a key machine fails;
• staffing up for a peak period;
• covering a quiet-season gap in a business with a proven busy season.

For seasonal businesses, pairing the advance with a clear explanation of the pattern helps. Our guide to explaining lumpy bank deposits is written for exactly this.

A worked example (illustrative)

A beachside café trades strongly from October to April and slows through winter. Card takings average about $55,000 a month over the year, with most of it in summer. The owner wants $30,000 in September to replace a commercial fridge and buy stock before the season.

A merchant cash advance would collect more in the busy months and less in the quiet ones, which suits the pattern. An unsecured loan with fixed weekly repayments might cost less overall if the café can comfortably carry the repayments in winter. The right answer depends on the numbers, which is why we compare both.

How do you compare a merchant cash advance with other options?

The fairest comparison looks at the whole cost and the whole cash-flow effect, not just the daily or weekly deduction. For each option on the table, ask:

1. What’s the total amount repayable?
2. How long will it take to repay at your realistic card volumes, including quiet months?
3. How much will be deducted in your quietest month, and can the business carry it?
4. What happens if you want to repay early?
5. Are there fees beyond the agreed total?

Line those answers up next to an unsecured loan and a line of credit. Sometimes the share-of-sales structure is worth paying for because it protects winter cash flow. Sometimes a fixed repayment is cheaper and perfectly manageable. The point is to choose with the numbers in front of you.

Card-heavy business? Let’s compare your options properly.

Tell us about your card takings and what you need. We don’t run a credit check at the enquiry stage, your details aren’t spread around to multiple funders, and a real person lays out the options, including whether a simpler loan would cost you less.

Please give accurate card turnover and mention any advances already running. Overlapping share-of-sales deductions change the answer, so we need to know. See if you qualify.