What is a merchant cash advance in the UK?

A merchant cash advance (MCA) is a form of business finance where a provider gives you a lump sum of cash in exchange for a percentage of your future card sales, plus a fee expressed as a factor rate (e.g. 1.3×). Technically it is not a loan — it is the purchase of future receivables — which is why MCAs are not regulated under the Consumer Credit Act or by the FCA in the same way as business loans. Repayment is automatic: the MCA provider takes a fixed percentage (the holdback rate, typically 10–20%) of your daily card terminal receipts until the total repayment amount is cleared.

How are MCA factor rates calculated?

A factor rate is a simple multiplier applied to the advance amount to calculate the total repayment. A factor rate of 1.3 means you repay £1.30 for every £1.00 advanced. On a £20,000 advance at 1.3×, you repay £26,000 — a cost of £6,000. Unlike APR, factor rates do not account for time — a 1.3× factor over 6 months is far more expensive (in APR terms) than a 1.3× factor over 24 months. Always convert factor rates to effective APR before comparing with other finance products.

Is an MCA the same as a business loan in the UK?

No. Legally, an MCA is structured as the purchase of future sales receivables, not a loan. This means: no fixed repayment term (repayment fluctuates with your card sales), no interest rate per se (uses a factor rate instead), and crucially — MCAs are not regulated by the FCA as consumer credit. This creates risks for business owners as there is no mandatory affordability assessment and limited recourse if the terms are unfair. The Government has consulted on extending FCA regulation to MCAs, but as of 2026 this has not yet been implemented.

MCA vs business loan — which is better?

For most businesses, a traditional business loan will be significantly cheaper than an MCA. A bank overdraft at 5–8% EAR or a business loan at 8–15% APR will cost far less than an MCA with an effective APR of 40–150%. MCAs may make sense in very specific circumstances: you need cash extremely urgently (MCAs can be approved in 24–48 hours), you have poor credit that prevents you accessing conventional finance, or your business has highly seasonal revenues and you want repayment tied to actual sales volume. Exhaust all other options first.

Are merchant cash advances regulated in the UK?

Currently, MCAs extended to limited companies are largely unregulated by the FCA. Unlike business loans, MCAs are structured as the purchase of future receivables rather than a credit agreement, placing them outside the Consumer Credit Act 1974 framework. The FCA has expressed concerns about the sector and there have been Government consultations on extending regulation. The British Business Bank and debt charities strongly advise business owners to obtain independent financial advice before taking an MCA, given the very high effective cost and lack of regulatory protection.

Merchant Cash Advance Calculator UK | MCA Cost

Last updated: March 2026

Important Warning: Merchant cash advances are very expensive. The effective APR is often 40–150% or higher. Always consider alternatives (bank overdraft, business loan, invoice finance) before proceeding. Seek independent financial advice.

UK MCA Cost Calculator

Enter your advance details to see total repayment cost and estimated effective APR

Advance Amount (£) Typical UK MCA range: £2,500 – £500,000

Factor Rate Typical range: 1.1 (cheapest) to 1.5 (most expensive)

Monthly Card Revenue (£) Your average monthly card terminal / online payment revenue

Holdback Rate (%) Percentage of daily card sales withheld (typically 10–20%)

MCA Factor Rates vs Effective APR — Reference Table

This table illustrates how factor rates translate into effective annual percentage rates depending on how long repayment takes. The shorter the repayment period, the higher the effective APR.

Factor Rate	Total Cost per £10,000	Repayment Period	Effective APR (approx.)
1.1×	£1,000	6 months	~40% APR
1.2×	£2,000	6 months	~80% APR
1.3×	£3,000	12 months	~60% APR
1.3×	£3,000	6 months	~120% APR
1.5×	£5,000	12 months	~100% APR
1.5×	£5,000	6 months	~200% APR

For comparison: A bank business overdraft typically costs 5–10% EAR. A business loan from a high street bank runs 8–15% APR. Invoice finance averages 10–20% effective APR. An MCA at even 1.1× factor is substantially more expensive than conventional finance.

Complete Guide to Merchant Cash Advances in the UK

What Is a Merchant Cash Advance?

A merchant cash advance (MCA) is a form of short-term business funding where a provider advances a lump sum to your business in exchange for a share of your future card sales revenue, plus a fee. Unlike a traditional loan, an MCA is not technically a loan at all — it is legally structured as the provider purchasing a portion of your future receivables (the money customers will pay you by card) at a discount.

Repayment works through a daily or weekly holdback: the MCA provider integrates with your card payment terminal (or payment gateway) and automatically withholds a fixed percentage — typically 10–20% — of each day's card takings until the total repayment amount (the advance multiplied by the factor rate) has been cleared. If your sales slow down, repayment slows proportionally; if sales increase, you repay faster.

MCAs are particularly popular in the hospitality, retail, and e-commerce sectors — any business with significant card payment volumes. In the UK, providers include Capify, Liberis, YouLend, Clearco, and several high street banks' specialist SME divisions.

How Factor Rates Work

The cost of an MCA is expressed as a factor rate, not an interest rate or APR. A factor rate is a simple decimal multiplier. If you are advanced £15,000 at a factor rate of 1.35, your total repayment is £15,000 × 1.35 = £20,250. The cost of the advance is £5,250, regardless of how long repayment takes.

This is the key problem with factor rates: they obscure the true cost of borrowing because they do not account for time. A factor rate of 1.3 repaid over 6 months has an effective APR of around 120%, while the same factor rate repaid over 18 months has an effective APR of approximately 40%. The faster your business grows (and card sales increase), the faster you repay — but the more expensive the advance is in annual percentage rate terms.

To convert a factor rate to an approximate effective APR, you need to estimate your repayment period based on your holdback rate and monthly card revenue. Our calculator above does this automatically. The formula is: Effective APR ≈ ((Factor Rate − 1) / Estimated Months) × 12 × 100.

Why MCAs Are So Expensive

MCA providers take on significantly more risk than conventional lenders. There is no fixed repayment schedule, no security (the advance is typically unsecured), and providers accept that repayment will fluctuate with sales performance. The "purchase of future receivables" structure also means they bear the risk that your business fails before repayment is complete. These factors command a substantial premium over conventional business finance.

Additionally, the lack of FCA regulation means providers face fewer constraints on pricing. There are no mandatory affordability assessments, no APR disclosure requirements (as there are under the Consumer Credit Act for regulated credit), and limited rules around rolling MCAs — where a business takes a new advance before the first is repaid, creating a cycle of increasingly expensive debt.

When Might an MCA Make Sense?

Despite the high cost, there are genuine circumstances where an MCA may be the least-bad option. These include: very urgent cash needs (MCAs can be approved and funded within 24–48 hours, versus weeks for a bank loan), businesses with poor or no credit history that cannot access conventional finance, and highly seasonal businesses (such as holiday accommodation or event catering) where flexible, revenue-linked repayment is genuinely valuable.

However, even in these circumstances you should first explore: a bank overdraft or revolving credit facility, invoice finance or factoring if you have B2B receivables, an asset-backed loan or asset finance if you have equipment to secure against, a Government-guaranteed facility under the Growth Guarantee Scheme (the successor to CBILS/BBLS), or a business credit card for smaller, short-term funding needs.

Alternatives to MCAs

Alternative	Typical Cost	Speed	Best For
Bank overdraft	5–10% EAR	Days–weeks	Short-term cash flow gaps
Business loan	8–15% APR	1–4 weeks	Planned investment, fixed repayment
Invoice finance	10–20% eff. APR	3–7 days setup	B2B businesses with slow-paying debtors
Asset finance	4–12% APR	1–5 days	Buying equipment or vehicles
Business credit card	15–25% APR	Instant (if existing)	Small, frequent purchases
Merchant Cash Advance	40–150%+ eff. APR	24–48 hours	Last resort only

FCA Regulation — The Regulatory Gap

The FCA regulates consumer credit (including loans and hire purchase to individuals and sole traders in some circumstances) but has limited jurisdiction over MCAs advanced to limited companies, as these are not classified as credit agreements. This regulatory gap is a significant consumer protection concern. The FCA's 2022 review of the UK lending market highlighted MCAs as an area of concern, particularly around transparency of cost, rollovers, and the use of confessions of judgement (a legal mechanism allowing lenders to obtain a court judgment without serving notice).

The Government's 2023 small business lending consultation proposed extending FCA oversight to MCAs, requiring providers to conduct affordability assessments and disclose costs in APR terms. However, as of early 2026, primary legislation to implement these changes had not been passed. Business owners should therefore exercise considerable caution and seek independent advice from a qualified business finance broker or accountant before committing.

UK MCA Providers

Major UK merchant cash advance providers include Capify (one of the UK's original MCA providers, founded 2007), Liberis (specialist in e-commerce and hospitality), YouLend (partnered with several large payment processors including Shopify), Clearco (focused on e-commerce businesses), and 365 Business Finance. Some high street banks also offer revenue-based finance products that function similarly to MCAs. Always compare at least three providers and use a whole-of-market broker to access the full range of options.

Frequently Asked Questions

An MCA is a lump sum advance repaid via a fixed percentage of your daily card sales (the holdback rate). Legally it is the purchase of future receivables, not a loan. The cost is a factor rate multiplier (e.g. 1.3× means you repay £130,000 for every £100,000 advanced). MCAs are unregulated by the FCA for limited companies and carry very high effective APRs — typically 40–150%+.

A factor rate is a simple multiplier. Factor rate × advance amount = total repayment. A 1.3× factor on £10,000 = £13,000 total repayment, costing £3,000. Unlike APR, factor rates don't account for time — the same factor rate over 6 months vs 18 months is dramatically different in annual cost terms.

No. An MCA is technically the purchase of future sales receivables, not a loan. This means no fixed repayment schedule, no Consumer Credit Act protections for limited companies, and no FCA regulation. Repayment fluctuates with card sales. It is generally much more expensive than a regulated business loan.

A business loan at 8–15% APR is almost always cheaper than an MCA at 40–150%+ effective APR. An MCA may be justified only if you need funds within 24–48 hours and have exhausted all other options, or if your business has poor credit preventing access to conventional finance. Always explore overdrafts, invoice finance, and asset finance first.

MCAs to limited companies are largely unregulated by the FCA as of 2026. They fall outside the Consumer Credit Act because they are structured as purchase of receivables, not loans. The Government has proposed extending regulation to MCAs but legislation had not passed as of March 2026. Always seek independent financial advice before committing.

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Expert Reviewed — This calculator and guide are reviewed by our team of business finance specialists. Rate comparisons verified against FCA, British Business Bank, and published lender data. Last verified: March 2026.

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Our calculators are maintained by qualified accountants and financial analysts. All tools use official HMRC, FCA, and British Business Bank data. Learn more about our team.

Invoice Discounting Calculator — A Cheaper Alternative See how invoice discounting compares in cost to a merchant cash advance for your business.

Merchant Cash Advance Calculator UK