Commercial finance · Card takings
Merchant cash advance: funding repaid as a share of future card sales
A merchant cash advance gives a card-taking business a lump sum now in exchange for an agreed total repayment, collected as a percentage of its card sales until that total is reached. Ocean Capital Exchange introduces businesses to third-party providers.
Definition
What a merchant cash advance is
A merchant cash advance is a purchase of a business's future card receipts: the provider pays a lump sum and collects an agreed fixed total by deducting a set percentage of card transactions until it is repaid.
It is not a loan with interest and a fixed term. The total repayable is agreed upfront; how long it takes depends on how much you take on card.
When card sales are high, repayment is faster; when they fall, deductions fall too. That flexibility comes at a cost that can be significant when expressed against the time taken to repay.
At a glance
- Provides
- A lump sum advance
- Repaid from
- A set percentage of card sales
- Cost basis
- Usually a fixed total repayment amount; the sales-deduction percentage is not interest or APR
- Term
- Not fixed; depends on card takings
- Suits
- Businesses with regular card revenue
- OCE's role
- Introducer to third-party providers; not a lender
Suitability
Which businesses it tends to suit
A merchant cash advance only works where card sales are a meaningful, regular share of revenue.
Usually a fit
- Retailers, hospitality and leisure businesses that take most payments by card.
- Seasonal businesses wanting repayments to ease in quieter months.
- Businesses needing working capital that may not suit a term loan's fixed schedule.
- Businesses with an established card-processing history.
Usually not a fit
- Businesses paid mainly by invoice or bank transfer.
- Low-margin businesses where the deduction would squeeze cash flow too far.
- Businesses expecting card sales to fall significantly.
- Long-term investments where cheaper structured finance may be available.
Process
How a merchant cash advance works
The mechanics are distinctive.
- 01
Card history reviewed
The provider reviews your past card takings.
- 02
Offer set
If it proceeds, the provider sets an advance amount, a total repayment amount and a deduction percentage.
- 03
Advance paid
The lump sum is paid to the business.
- 04
Deductions begin
An agreed percentage of each card transaction is collected, through the card terminal or by a linked arrangement.
- 05
Repayment flexes
Collections rise and fall with card sales.
- 06
Completion
Deductions stop once the total repayment amount has been collected.
Comparison
Merchant cash advance compared with a term loan
The repayment mechanism is the main difference.
| Merchant cash advance | Unsecured term loan | |
|---|---|---|
| Repayment | Percentage of card sales | Fixed instalments |
| Cost | Fixed total repayment amount | Interest plus fees |
| Duration | Depends on card takings | Fixed term |
| In a quiet month | Lower deductions | Same instalment |
In practice
Typical uses
Common reasons businesses consider an advance:
- Stock
- Buying ahead of a busy season.
- Refurbishment
- Updating a shop, restaurant or venue.
- Equipment repairs
- Replacing kit urgently.
- Cash-flow smoothing
- Bridging quieter trading periods.
- Advance receivedAssumed figure
- £30,000
- Agreed total repaymentAssumed figure
- £36,000
- Cost of the advance£36,000 minus £30,000
- £6,000
- Assumed monthly card sales
- £25,000
- Assumed deduction rate£3,750 a month collected
- 15%
- Approximate collection period£36,000 ÷ £3,750, if sales stay level
- 9.6 months
Hypothetical arithmetic only. The amounts and deduction rate are assumptions, not typical or offered terms. The deduction rate is a share of sales, not an interest rate or APR. If card sales fall, the period lengthens; the total repayable does not change.
Weighing it up
Benefits and material limitations
Flexible repayment is valuable but can be expensive.
Benefits
- Repayments flex with sales
- Lower takings mean lower collections.
- No fixed instalments
- No set monthly sum to find.
- Based on card history
- Assessment focuses on card receipts.
Material limitations
- Cost can be high
- The fixed repayment amount can be large relative to the advance, especially if repaid quickly.
- Not comparable to APR
- Pricing is not expressed as interest, making comparison with loans harder.
- Cash-flow drag
- A share of every card sale goes to the provider until repaid.
- Processing restrictions
- Agreements may restrict changing card processor.
- Guarantees
- Providers may ask for performance guarantees.
- Falling sales
- Repayment takes longer, and agreements may contain minimum collection terms.
Why Ocean
Understand what sales-linked finance really costs
Ocean helps businesses taking card payments consider whether a sales-linked advance is appropriate, rather than treating it as a direct substitute for every business loan.
Industry context, not just an application form
We discuss how your business trades, when money comes in and what the funding must achieve, so sector-specific cash-flow pressures form part of the conversation.
Access to a wide panel
Ocean works with a wide panel of third-party lenders and specialist finance providers. That gives you options beyond one bank's product range, subject to provider appetite and eligibility.
The product should fit the business
We help establish whether a loan, invoice facility, asset funding or another structure fits the requirement, rather than starting with whichever product a single bank has available.
Compare the terms that matter
Look beyond a headline rate. We help you understand the fees, repayment pattern, security, guarantees and exit conditions relevant to the options being discussed.
Less repeated legwork
A central point of contact helps organise the initial enquiry and information for relevant providers. It can reduce repeated explanations, although lenders may still require their own applications and checks.
Help asking the right questions
We help clarify what providers need and what to check before proceeding. You retain control of the decision and can take independent legal, financial or tax advice where needed.
For this product
Look at the collection share and quieter trading periods
A factor rate is not an interest rate or APR. We help you ask about the total amount to be collected, the share of eligible card sales and the effect of seasonal changes. Compare that structure with a loan or other working-capital option where relevant. Each provider sets its own eligibility and collection terms.
Ocean Capital Exchange acts as a broker and introducer, not a lender. We do not make lending decisions or guarantee that a provider will make an offer. Introductions are limited to providers available through our panel; each provider sets its own eligibility, terms and credit decisions.
Meet the Ocean team · Read our company and provider disclosures
Due diligence
What providers assess
Each provider applies its own criteria. Areas commonly reviewed include:
- Card turnover
- Volume and regularity of card takings.
- Trading history
- How long the business has processed card payments.
- Seasonality
- How takings vary through the year.
- Existing advances
- Any other advances already being repaid.
- Business profile
- Sector and premises.
Information often requested
- Card-processing statements
- Business bank statements
- Details of any existing advances or loans
- Proof of business ownership
Indicative only. Providers set their own requirements. Ocean Capital Exchange does not make lending decisions.
Pricing structure
Costs and repayment
Pricing is quote-specific. Components to understand:
- Total repayment amount
- The fixed sum repayable, including the provider's charge.
- Deduction percentage
- The share of each card sale collected. It determines timing, not total cost.
- Set-up fees
- Where included in the agreement.
- Default or minimum collection terms
- Conditions if sales fall or the agreement is breached.
Repayment and settlement
- Repayment is collected automatically as a share of card transactions.
- Collection timing depends on eligible card sales; check for a contractual long-stop date, minimum collections or reconciliation requirements.
- The agreed repayment amount is usually fixed; additional fees or default charges may change the amount payable under the contract.
- Early settlement may not reduce the total; check the agreement.
Checklist for comparing quotes
- 1.Total repayment amount against the advance
- 2.Deduction percentage
- 3.Card processor restrictions
- 4.Minimum collection or default terms
- 5.Guarantees required
- 6.Early settlement terms
Repayment illustration
Estimate total repayment and collection time
Use Quick estimate with the advance you need and expected monthly card sales to compare illustrations for strong, moderate and challenged financial profiles. Choose Compare my quote for a provider's actual factor rate, sales share and fees. Sales determine the estimated collection pace; no repayment date is promised. Factor rates and deduction shares are not interest rates or APR. These are not provider offers, and finance is subject to provider approval.
Illustrative example only
Your actual quote may be entirely different after a lender or finance provider reviews your financial information and funding requirements. These figures are not a lending decision or an offer of finance.
Your estimate
Enter your advance you need and estimated monthly eligible card sales to see an estimate.
0 of 2 required figures entered
Total repayable and collection pace
Enter your advance amount, factor rate, agreed share of card sales, estimated monthly card sales to see the breakdown.
0 of 4 required figures entered
Illustrative only, not a binding finance offer. Costs vary by lender and applicant; additional fees may apply and eligibility is subject to assessment. Ocean Capital Exchange is an introducer, not the lender. A factor rate is not an APR. Repayment speed varies with card sales; no payoff date is guaranteed. How this calculator works.
Discuss a merchant cash advance
Speak to our team whenever you’re ready. You don’t need to complete this calculator to discuss your options or request a quote.
Our enquiry form opens in a new tab. Calculator figures are not sent automatically; include any you would like us to review.
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Merchant cash advance questions
Still unsure? Call +44 20 7183 2026.
Is a merchant cash advance a loan?
It is usually structured as a purchase of future card receipts rather than a loan, with a fixed total repayment instead of interest.
Why is there no interest rate or APR?
Providers often quote a fixed cost and a share of card sales to collect rather than an annual interest rate. The collection share is not an APR. An annualised comparison would also need the timing of deductions and all fees; ask the provider how to compare the full cost with a loan.
How long does repayment take?
It depends on your card sales. Higher takings repay faster; lower takings slower.
What does the deduction percentage mean?
It is the share of each card sale passed to the provider. It controls the pace of repayment, not the total cost.
Can I switch card processor during an advance?
Many agreements restrict this. Check before signing.
What if my card sales stop?
Agreements may contain terms covering this situation, including guarantees. Read them carefully.
How does it compare to an unsecured loan?
A loan has fixed instalments and interest; an advance has flexible collections and a fixed total. The comparison table above sets out the differences.
Independent background reading
These independent sources explain general concepts. They do not endorse Ocean Capital Exchange or confirm our providers, product availability or terms. Your provider’s agreement takes precedence over an illustration.
Important information
Ocean Capital Exchange Ltd introduces businesses to third-party providers of merchant cash advances. We are not a lender, do not make credit decisions and do not guarantee that finance will be offered or on what terms. Any facility is subject to the provider's own assessment, due diligence, approval and documentation.
A merchant cash advance can be an expensive form of finance. Consider the total repayment amount carefully against alternatives.
This page is general information, not financial, legal or tax advice. Worked examples and calculator results are hypothetical arithmetic based on assumed or visitor-entered figures; they are not quotes, offers or typical terms. Business finance may require security or personal guarantees. Read any agreement carefully and take independent advice where appropriate.
Talk through your card takings
Tell us about your card sales and what the funding is for. We can explain how an advance works and introduce suitable providers.
- Or call
- +44 20 7183 2026
- Office
- 73 Watling Street, London, EC4M 9BJ