Merchant cash advance lenders: who funds UK card-taking businesses

Who actually funds a card sales advance

A card sales advance is funded by a balance sheet that is prepared to buy receivables it cannot yet see, priced on the strength of your card processing history. Three kinds of organisation do this in the United Kingdom, and they behave differently enough that the choice materially changes what you are offered.

• Independent specialist funders. Firms such as YouLend, Liberis, Capify and 365 Business Finance exist principally to buy future card sales. They have the deepest appetite, the widest sector tolerance and the most flexibility on how an advance is sized and collected.
• Acquirer-embedded programmes. Barclaycard, Lloyds Cardnet, Worldpay, Dojo, SumUp, Stripe Capital and PayPal Working Capital all put funding in front of merchants who already process card payments with them. The offer arrives inside the portal you already use.
• Broader lending platforms. iwoca and Nucleus sit alongside the specialists, offering an advance as one product among several, which means the conversation can move to a flexible loan or a revolving line if the advance is the wrong shape.

One thing worth knowing before you compare offers: the brand on the offer letter is not always the balance sheet behind it. Several acquirer-branded funding programmes are white-labelled from specialist funders, so the credit decision, the factor rate and the collection mechanics can be the same product you would reach directly, presented under a familiar name. That matters because it removes the assumption that a bank-branded programme is automatically the cheapest or the most flexible option on the table.

The trade body for this market is the British Merchant Cash Advance Association, which publishes conduct standards its members sign up to. Membership is not a legal requirement and plenty of active funders are not members, so it is a useful signal rather than a filter.

Direct funders versus a broker: what actually changes

Going direct to one funder gets you one answer. That is the whole of the difference, and whether it matters depends on how close your business sits to the middle of that funder's appetite.

Approach a single specialist and you receive their view of your card data, their factor rate for your sector, and their holdback percentage. If your takings are steady, your sector is mainstream and your processing history is clean, that answer may be perfectly good. The problem arrives when your trade has a feature the funder in front of you does not like: heavy seasonality, a recent dip, a sector on their internal watch list, a short processing history, or an existing advance still running. A single funder either prices that feature into the factor rate or declines, and you have no way of knowing whether the next funder would have taken a different view.

Working through an arranger changes the shape of the exercise. We present the same case to funders whose appetite we already know, which surfaces the spread between them. That spread is often wider than business owners expect, because funders differ not only on price but on how they size an advance against turnover, how much of your daily takings they insist on taking, and whether they will sit behind an existing agreement. We take a commission from the funder that writes the deal, which is standard across this market and which we tell you about; it does not come out of your advance. What you should compare between a direct approach and a brokered one is the total amount to be delivered and the holdback, not the headline speed. Our page on merchant cash advance eligibility sets out the tests every funder applies before any of this begins.

The UK funder panel we place through

Funders are not interchangeable. Each has a house style, and matching the case to the house style is most of the value in placing an advance well. The names below are the ones most often relevant to a UK business taking card payments.

• YouLend. Heavily embedded with acquirers and marketplaces, and comfortable with fast-moving retail and hospitality trade. Strong where the card data is clean and recent.
• Liberis. A long-established UK funder of advances against card takings, widely distributed through partner acquirers, with a track record in small high street businesses.
• Capify. One of the older names in this market in the United Kingdom, with appetite that extends to businesses where card takings are only part of total turnover.
• 365 Business Finance. A specialist in advances repaid as a fixed percentage of card sales, typically working with small and medium retail, hospitality and personal services businesses.
• iwoca. Better known for flexible business loans, which makes it a useful place to test whether a term facility beats an advance for a given business.
• Nucleus. A broader commercial funder, relevant where an advance needs to sit alongside or against other business finance.

Where an advance is genuinely small, or the business is a one-person trade, the panel narrows and the relevant considerations change; we cover those cases on our small business cash advance and sole trader cash advance pages.

Funding offered through your card acquirer

If you already take card payments, your acquirer is probably the first place funding will be offered to you, because it owns the data that underwrites the decision. Barclaycard, Lloyds Cardnet, Worldpay, Dojo, SumUp, Stripe and PayPal all run programmes of this kind, and the convenience is real: the provider can see your settlement history, so approval can be near instant and the split can be taken at source before the money reaches your account.

There are two trade-offs worth weighing. The first is that the offer is sized by an algorithm against the takings that pass through that one provider, so a business splitting card volume across two terminals or an online gateway may be offered less than its true turnover supports. The second is switching cost: an advance collected at the acquirer creates a practical tie to that acquirer for the life of the agreement, which can be awkward if you were planning to move to cheaper card processing. We deal with that specific problem on our card terminal funding page.

None of this makes an embedded offer a bad one. It makes it one quote among several, and it is straightforward to hold it up against the independent panel before you accept.

How funders price an advance, and what that costs

Pricing here does not work like a loan, and the difference is the single most common source of confusion. A funder does not quote an interest rate that accrues over time. It quotes a factor rate: a multiplier applied to the advance that fixes, on day one, the total amount to be delivered back.

Factor rates typically fall between 1.1 and 1.5. An advance of £20,000 at a factor rate of 1.25 means £25,000 is delivered in total, whatever happens to the timetable. Collection is a fixed percentage of daily card takings, typically between 5 and 20 percent, applied every trading day until the purchased amount has been delivered in full. Most agreements complete in four to eighteen months, but that window flexes with trade rather than being fixed: a strong quarter shortens it, a quiet one lengthens it, and the total does not change either way.

Three consequences follow. Repaying quickly does not usually save you money, because the amount owed is fixed rather than accrued, although some funders offer a discount for early settlement and it is always worth asking. Comparing an advance with a term loan on headline numbers alone is misleading, because a factor rate is not an APR. And the holdback percentage matters as much as the factor rate, because it governs how much cash leaves the business each day. You can model the cost with a cash advance calculator before you take a view on any offer.

What a funder examines before offering terms

Underwriting an advance is an exercise in reading card data, which is why the process looks so different from a bank credit application. A funder is trying to establish one thing: how confidently it can predict the card takings it will be collecting from.

• Card processing history. Usually a minimum of three months, with more history producing better terms. Merchant statements from your acquirer are the core document.
• Monthly card turnover. Roughly £2,500 a month is a common floor, and the advance is normally sized around one month of card takings.
• Consistency and seasonality. A funder that understands your trading pattern will set a holdback you can live with through a quiet month. One that does not will set it too high.
• Sector. Retail, hospitality, salons and personal services are core territory. Some sectors are declined outright regardless of turnover.
• Existing funding. A second advance stacked on a first is treated cautiously, and some funders will not sit behind another agreement at all.
• Credit position. Checked, but weighted far less heavily than turnover, and impaired credit usually affects the factor rate rather than the answer.

Businesses that are trading well but too young to satisfy a bank often find this the most accessible funding route available to them, precisely because the assessment rests on card data that already exists rather than on accounts that do not.

Not a loan, and largely outside the FCA perimeter

The legal shape of this product is a receivables purchase, not borrowing. A funder buys a defined amount of your future card sales at a discount and collects it as those sales occur. Nobody lends you money and no interest accrues, which is why the documentation refers to a purchase price and a purchased amount rather than a principal and a rate.

That distinction carries regulatory weight. Where the business is a limited company, the agreement is unregulated commercial finance, sitting outside the Financial Conduct Authority's consumer credit perimeter. In practice that means no Consumer Credit Act rights, no statutory cooling-off period, no Section 75 protection, and no automatic route to the Financial Ombudsman Service if the relationship breaks down. Your protection comes from the contract, from ordinary commercial law, and from the conduct standards a funder chooses to sign up to.

The picture is not identical for every business. Agreements with sole traders and small partnerships can in some circumstances fall within the Consumer Credit Act, and the analysis turns on how the agreement is drafted and what it is for, so ask any funder to confirm its position in writing before you sign. We are an arranger and introducer, not a lender, and we are not authorised by the Financial Conduct Authority.

How we structure it

When a case comes in, the first thing we ask for is merchant statements rather than accounts. Card data is what the decision turns on, and reading it properly is where most of the work sits: the pattern across a full trading year, the split between card and cash, how much volume passes through each terminal or gateway, and whether the last quarter is representative or a blip. That reading is what tells us which funders will see the case as clean and which will see it as a story that needs explaining.

We then present the business to the funders whose appetite fits, rather than papering the whole market. A shotgun approach produces multiple credit searches and a set of offers that all price the same way, because every funder is reacting to the same unexplained data. Matching the case to two or three genuinely appropriate funders, with the seasonality and any historic dip explained up front, produces better terms. Where an offer comes back with a holdback we think the business cannot trade through comfortably, we negotiate it down rather than passing it on, because a split set too high is the most common reason an advance becomes painful.

Matt Lenzie handles each enquiry personally. He spent much of his career on the funding side, which is where the judgement about what a credit team will actually accept comes from. Clients are not handed to a junior desk, and if the honest answer is that an advance is the wrong product for the business in front of us, we say so and point at what fits instead.

Structured personally by Matt Lenzie, 25 years in commercial finance, £500 million+ arranged

Related

• Merchant cash advance requirements: what UK funders ask for
• A small business merchant cash advance, arranged against your card takings
• Merchant cash advances with bad credit, and what no credit check really means
• Card terminal funding: raising money against your PDQ takings
• What is a merchant cash advance?
• How does a merchant cash advance work?