Merchant Card Funding is an alternative form of commercial finance to conventional bank loans and overdrafts. It provides businesses – especially in the wholesale and retail sector – with a flexible line of credit based on projected debit card and credit card sales.
A variety of specialist funders provide merchant card funding with different terms and fees. Our consultants at Business Finance Solutions (UK) Ltd can help negotiate the best rates and the most suitable terms for your sector and business objectives.
How Merchant Card Funding Works
Traditional Merchant Card Funding provides a business with a cash lump sum in return for an agreed percentage of their projected credit/debit card sales. This is based on their historical sales record and prospects for the duration of the loan, as well as their credit rating. The percentage of future card sales ‘sold’ to the lender reflects the amount of finance required.
- The cost of finance also includes an arrangement fee and interest.
- In most merchant card funding agreements you will continue to process your debit and credit card sales as usual, and make repayments to the lender on an agreed schedule.
- In some circumstances the lending institution may ‘acquire’ your debit/credit card payments and process them on your behalf. Interest and the repayment percentage are deducted and the balance repaid to you. This is a useful finance option for small businesses that do not operate their own debit/credit card processing facilities.
- Merchant card funding agreements are flexible but are normally short-term arrangements, with repayments calculated as a percentage of daily, weekly or monthly card sales until the full cost of finance is recovered.
Please note: Merchant card funding, sometimes known by the alternative name of a ‘merchant cash advance’ is distinct from credit card funding – whereby a business uses a commercial credit card to fund business expenditure.
Merchant card funding gives businesses a flexible line of short-term credit based on anticipated sales. It is often more afforable than other types of finance and lets you leverage past performance to plan for future growth. There are several types of business finance – some of which will be better suited to your needs than others. Each carries associated costs, advantages and disadvantages.
Find Out More
For more information, please speak with one of our advisers today by calling 0345 50 50 888.