What are merchant cash advances?
If a business takes payments for its goods or services via a card terminal or through an online payment process then merchant cash advances are a way of raising unsecured finance.
Merchant cash advances are loans provided by a lender to a business and the repayments are met by the lender deducting a percentage of each sale that has been processed through a card terminal until the loan is paid off. This type of loan has no fixed monthly repayments or interest rates to deal with.
How do merchant cash advances work?
A business borrows a sum of money from a finance provider to finance the growth of its company.
The finance provider then works with the cash terminal provider and as each sale passes through the card terminal a percentage of its amount is taken as payment towards the outstanding loan.
As the lender can see, prior to issuing the loan, exactly how much money is flowing through the business there is no need for credit checks or for security to be offered up to the lender.
This method of repayment means that the business will only repay what it can afford as it is based on a percentage of its monthly sales. If its sales differ then the repayments made will also differ.
The amount a business can borrow will depend on its cash flow and the lender will check that the amount recovered from card payments will be sufficient to repay the loan in a suitable amount of time.
What are the advantages of merchant cash advances?
- It provides a lump sum of cash with no restrictions on its use to help a business develop and grow.
- It makes raising finance easier for small businesses as there is no need for credit checks.
- There is minimal paperwork to fill in and the loan can be quick to access.
- No collateral is required which means that assets such as property, car and equipment are not at risk.
- As repayments are taken at source from each sale there is no possibility of defaulting on the loan, you will always be able to repay the loan as it is always based on the cash flow from sales made.
Is a merchant cash advance right for my business?
- If you are a business that receives payment from its sales via a card machine then you can access a merchant cash advance.
- If you can’t afford to wait too long to get finance then it is a way of accessing cash very quickly.
- It is a good option if you don’t have a great credit score or have no valuable assets to help you apply for other finance.
- Repayment is automatic as the lender deals with the card terminal provider so you don’t have to do anything.
- The amount paid each month will increase if sales increase and the debt will be paid off quicker. Equally if your business experiences a slow period with fewer sales you will pay less each month and the debt will take longer to repay. As a result of this it should always be affordable unlike the traditional loans with fixed monthly repayment.
Have you thought about Invoice Finance as a cash flow solution for your business?
Invoice finance allows you to release cash quickly from your unpaid invoices.
As your lender, we can release up to 90% of your invoices within 24 hours. On payment of the invoice from your customers, we will then release the final amount minus any fees and charges. There are different types of invoice financing options available to businesses depending on the situation and the level of control they require in collecting unpaid invoices.
We are an invoice financing company who offer a solution whereby payments are collected on your behalf managed by our team of expert credit controllers so you can focus on running your business. Our Confidential Invoice Discounting solution is offered to businesses who want to maintain their own credit control processes, therefore this remains strictly confidential so your customers are unaware of our involvement.
The benefits of invoice finance companies such as Novuna Business cash flow
Want to understand more Cash Flow Finance terms?
Our Cash Flow Resource Hub has been set up to help SME's with cash flow finance advice, tips and resources to help with their cash flow position.
We explore ways you can begin improving your cash flow situation and start getting your business on track to positive cash flow.
Competent staff, slick technology. Would recommend
Halo is one of the smartest bits of tech I have seen & every team is only as good a it's people and I would like to take this time to actually specifically point out Alex Hall & Claire Davies. Alex is an account manager that has continually improved during our time working together and is a real credit to Novuna. Claire has been exceptional from start to finish; meticulous in her work and very patient with us at every temp - an absolute star. It is a shame that the email address went to a generic platform and not each individual. I totally understand why this works better for companies but it did mean that the personal element was lost meaning that starts like Claire will be harder to identify from a customer point of view.
High recommedation for Novuna Business Cashflow.
My company was in need of invoice factoring to assist with the cashflow due to the nature of debtor days with our clients. After looking at a number of options, the right decision was made to work in partnership with Novuna Business Cashflow. Right from setup through sales to customer service, the communication and support has been outstanding. Providing me with all the information I needed regarding new clients coming onto our books. The system they use is so user friendly and the drawdown payments are very efficient in the fast moving world of temporary payroll. This has allowed my company to look at positive growth knowing we are safe financial hands. I would highly recommend Novuna Business Cashflow 10/10.
Set up went well and communication was good.
Syed and Vipul were extremely helpful top class service
Very helpful from the start
Great people made this process very straightforward.
Jemma from Novuna (formally Hitachi) was brilliant. Worked with us throughout the process and succeeded when some others had failed. Carried out the necessary checks with a smile and cheery demeanour, making what would have been a laborious process quite manageable.
Teething problems -Maybe ?
It's still early days so I may alter this review at a later date. However with retentions and concentration limits and other items, were finding were not getting 85% up front, were probably getting nearer 70% Also when a customer pays the remaining allegedly 15% due to us seems not to be credited to become available. For instance a customer paid Â£6918 and a customer paid Â£1300 hence we should see an extra Â£1330 available (15% of both these payments). However availability seemed to go down and not up by Â£1330 !!! Hard to work out where this 15% has actually gone ? I'll re-submit this review when things become clearer.
I found Hitachi true to their world in every aspect of the service they promised. I can't recommend enough.
Excellent Customer care and service.
Excellent customer service from start of initial conversations, right through to finally becoming a customer. The whole team involved are a credit to Hitachi, they were accommodating and informative the whole way along the process. I would highly recommend Hitachi to future clients and business associates. Thanks Alan.
I really enjoyed working with the Hitachi team, professional, helpful and really good people to deal with. They have made what could have been a very difficult experience a pleasure. Very happy to recommend them.
Hitachi made the process of moving factoring facilities painless, bearing in mind we previously had our facility with the same provider since 1997. I cant fault Hitachi's staff and processes and we are delighted with the move.
Staff excellent all together professional
Great service so far
From start to finish the process for transferring our invoice finance to Hitachi has been been brilliant, a smooth transition, great communication our link Person Jonathan Oakes has helped the process go through seamlessly, A great experience so far and a brilliant start to what we hope will be a long term partnership.