As a business owner, you already know that cashflow will make or break your small business. Being part of a supply chain is necessary to the survival of your business and yet it brings its own headaches.

There are many short term lending options available to help ease the pressure on your finances and the good news is they benefit not only your business, but your customers and suppliers too.

This is part of a short blog series on alternative finance options for different business needs, written with advice from Henry Audley-Charles of

What kind of finance do you need? 

This post will cover alternative funding solutions ideal for:

  • a small business with impaired credit – this is one of the few options available OR
  • a small business that already has a loan arranged through a platform like Funding Circle, and looking for another loan from a short term lender
  • looking for fast payment (can be within 2 days) and a short term solution.

If this isn’t you we’ll be blogging about finance options more suited to other situations in the rest of this blog series, see the end of the post for details.

Merchant cash advance – it’s not a loan

A merchant cash advance agreement allows you to sell a portion of your future debit and credit card sales and receive cash up-front from the funder. As it’s a sale from you to the funder, it isn’t a loan and can be arranged even if you already have an unsecured loan.

Your obligation to the funder is to transfer a percentage of your daily debit and credit card income (which they arrange and take automatically) and merchant cash advance agreements typically operate for 6 – 9 months. It’s a relatively expensive way of raising cash, however it can be a good solution if you’re not able to take out an unsecured loan.

One of the main benefits is this can be agreed very quickly and borrowers can receive the money within two working days. The payments you must make will be agreed with the funding provider on a case by case basis; typical agreements specify 15-25% of your daily sales.

This funding option works well if you have a healthy stream of transactions and it’s clear to the funder that your forecasts are strong, you just need access to the cash earlier than your customers will pay. Of course you must be confident that your overall income will be sufficient to cover the cost of the advance, your other business expenses and provide enough profit to the business.

It is worth reiterating that paying 15%-25% of your daily debit and credit card sales to the funder will have a noticeable impact on your daily cash flow. Those businesses that mostly sell low margin products may find that a merchant cash advance agreement has a bigger impact on their cashflow than it does for other businesses.

Get the right finance

Merchant cash advances, as mentioned above, are a relatively expensive way to increase the available cash in your business and may not be the best solution. We strongly advise you speak to an experienced and ethical broker to guide your decision.

If you decide to look at funding options, an ethical broker will help you to get the right funding, on the right terms for your business. They will also ensure you fully understand the risks of whichever funding options you choose to pursue.

We’d like to thank both Henry Audley-Charles, Director of and Richard Reuss, Director of Mortgage Plus who we know through our monthly ICB branch meetings, for sharing their time and knowledge for this blog post.

This article is part of a series exploring alternative funding options for small businesses and you may find useful information for your business in our other articles, as listed below.

Blog posts in this series:

Featured image by Max Bender on Unsplash.

Categories: Team4 News