How merchant cash advances work in the UK
A merchant cash advance (MCA) provides unsecured business funding repaid automatically through a fixed percentage of daily customer debit and credit card takings. Rather than charging a compounding annual interest rate with fixed monthly instalments, providers quote a fixed factor rate applied directly to the advance amount.
Repayments flex naturally with your trading volume. On busy days with high card sales, a larger sum is swept from your merchant acquiring terminal to repay the advance faster; on slower trading days or seasonal lulls, deductions decrease proportionally, protecting operating cash flow without late payment penalties.
Factor rate and estimated cash-flow cost
A factor rate multiplies the advance to estimate the total contractual payback before any separate fees. For example, £25,000 at a factor rate of 1.20 gives a £30,000 payback, a £5,000 funding charge before other fees.
The annualized cost estimate depends on how often remittances are made and how quickly they repay the advance. This calculator assumes equal payments at the selected frequency and a smaller final remittance where needed. Actual sales-linked collections, contract terms and fee treatment can differ, so use the result as an illustration rather than a directly comparable statutory APR.
Worked example: £25,000 advance at 1.20 factor rate and 15% holdback
For an illustrative £25,000 advance at a 1.20 factor rate, estimated monthly card takings of £20,000 and a 15% holdback imply £3,000 of average monthly remittances. Total payback is £30,000 before fees, so the funding charge is £5,000, or 20% of the advance.
At the selected daily-business-day convention (260 remittances per year), the estimate is 216 payments of about £138.46 and a final payment of about £92.31, for 217 payments in total. The estimated effective annualized cost is about 56.75% before any fee. It assumes level remittances; actual sales-based amounts may vary.
Setting the holdback percentage and managing cash flow
The holdback percentage is the share of eligible card receipts applied to repayment under the provider’s contract. Enter an estimate of monthly card takings and the quoted holdback to see an average schedule; the calculation does not model individual days, weekends, refunds, settlement delays or changing sales.
Compare the assumed remittance with your cash-flow forecast and read the agreement for the sales base, collection timing, reconciliation process and any minimum payment.
Questions to check in a provider quote
Providers set their own application, trading-history, turnover, payment-processor and guarantee requirements. The calculator does not assess eligibility, approval likelihood, funding speed, collateral or personal guarantees.
Before accepting an offer, confirm the advance, net funds after fees, total payback, collection percentage, remittance frequency, sales reconciliation, default terms and any early-settlement treatment in the written agreement.
Use the right country page
This page uses UK terminology and pounds sterling. Its effective annualized cost is an estimate based on level payments at the selected frequency and the fee treatment entered; it is not a statutory APR determination. For US terminology and the nominal annualized estimate convention, use the US merchant cash advance calculator.
Inputs for the merchant cash advance loan calculator
Advance amount
The gross funding requested from the merchant finance provider before any setup fees.
Factor rate
The decimal multiplier quoted by the funder (typically 1.10 to 1.40) that sets total payback.
Payback structure
Choose between percentage deductions from daily card sales or setting a target payback duration.
Estimated monthly card sales
Average monthly card takings processed through your card machine or acquiring terminal.
Holdback percentage
The proportion of daily card turnover swept by the processor towards repaying the advance (typically 10% to 20%).
Target payback period
Desired duration in months to clear the advance balance under fixed-term modeling.
Remittance frequency
How frequently the provider sweeps repayments: daily business days (260/year), weekly, or monthly.
Origination or admin fee
Upfront facility or processing fee percentage charged by the provider. Enter zero if none.
Fee payment
How upfront facility fees are settled: deducted from advance cash, added to total repayment, or paid separately.
CALCULATOR QUESTIONS
UK merchant cash advance loan calculator questions
What is a factor rate on a merchant cash advance?
A factor rate multiplies the advance to estimate the total contractual payback. For example, £20,000 at 1.20 gives £24,000 before any separate fees. The agreement determines whether an early settlement changes the amount due.
How does the daily card holdback deduction work?
Your card terminal provider or payment gateway automatically sweeps your agreed holdback percentage (e.g. 15%) from each daily batch settlement and transfers it to the funder. The remaining 85% is deposited into your business bank account as usual.
What happens if card sales drop in a given month?
If the contract ties collections to card receipts, remittances may vary with eligible sales. The calculator uses average monthly sales and does not project daily variability, minimums, reconciliation or contract charges. Check your agreement for the actual collection and default terms.
Can I repay a merchant cash advance early to save money?
Early repayment treatment depends on the contract. The calculator applies the entered factor rate to estimate total payback and does not assume a rebate or discount; confirm any settlement adjustment with the provider.
Do I need personal assets or a debenture for an MCA?
Security and guarantee terms vary by provider and agreement. This calculator does not determine whether an advance is secured or whether a director guarantee is required; review the offer documents.
How is the annualized cost estimate calculated?
The estimate solves for the periodic rate that equates net funds after the entered upfront fee with the projected remittances, including a smaller final payment when needed. It annualizes that rate using the selected frequency. The result assumes level periodic remittances and is not a lender quote or statutory APR.