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How Our Card Machine Loans Service Works
- Funding from £20,000 to £600,000
- Pay back through future credit/debit card terminal sales of your business
- Unsecured finance – your business assets are safe
- Flexible refinance
- Same-day business funding
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What is a Card Machine Loan?
A Card Machine Loan (often referred to as a MCA or Merchant Cash Advance) is a form of business financing that’s been gaining popularity among UK businesses, particularly those in the retail and hospitality sectors. But what exactly is it, how does it work, and how does it differ from a traditional loan?
Definition of a Card Machine Loan
A Card Machine Loan isn’t actually a loan, but rather an advance on your business’s future credit and debit card sales. In exchange for a lump sum of capital, a business agrees to pay a certain percentage of its daily credit/debit card sales until the agreed amount has been repaid in full.
Simply put, a card machine loan provides an upfront amount of cash to a business, which is then repaid via a percentage of the business’s daily card transactions.
Businesses typically use this form of financing with a high volume of card transactions, like restaurants, shops, and online businesses.
How Does a Card Machine Loan Work?
When a business obtains a card machine loan, it sells a portion of its future card sales to the lender in exchange for a lump sum of money.
Here’s how it works in practice:
- You apply for a card machine loan with a provider, who assesses your average monthly card transactions.
- The provider offers you a cash advance based on your card revenue.
- You receive the funds in a lump sum, usually within days.
- A percentage of your daily card sales (known as the holdback) is automatically transferred to the lender until the advance, and the factor fee is fully paid off.
A key aspect of card machine loans is that they don’t have a fixed repayment schedule like traditional loans. Instead, repayments fluctuate in line with your daily card sales – so in slower business periods, your repayments will be lower, and during busier periods, they’ll be higher.
The Difference Between Card Machine Loans and Traditional Loans
It’s crucial to differentiate between the two:
- Payment structure: While loans typically require fixed monthly payments, card machine loan repayments fluctuate based on the business’s card sales.
- Interest rates: Loans usually have an annual percentage rate (APR), whereas card machine loans have a factor rate, which can result in higher overall costs.
- Collateral: Loans often require collateral, but card machine loans are unsecured, meaning they don’t require any assets to back them up.
- Approval and funding time: Card machine loans can often be approved and funded in a matter of days, while traditional loans can take weeks or even months.
In the next section, we’ll explore the benefits of Merchant Cash Advances in more detail, helping you determine whether this form of financing is a good fit for your business.
The Benefits of Card Machine Merchant Cash Advance Loans
For some businesses, a card machine loan offers significant benefits over traditional business loans. It’s a unique form of finance, one that can be an ideal fit for certain businesses.
Quick Access to Capital
One of the most appealing aspects of a card machine loan is how quickly businesses can access the funds. Traditional business or working capital loans often have lengthy application processes, and it can take weeks or even months to see the money in your account.
With a card machine loan, once you’re approved, you could have the funds within days. This rapid access to capital can be crucial for businesses facing sudden cash flow issues or unexpected expenses.
High Approval Rates
Card machine loans have high approval rates compared to traditional loans. This is because the decision is based mainly on your business’s card transaction volume rather than on credit scores or financial history.
A card machine loan can provide a lifeline for businesses with a less-than-stellar credit history when other lenders have shut the door.
No Collateral Required
Unlike traditional loans, card machine loans are unsecured. That means you don’t have to put up any assets as collateral. This feature is particularly beneficial for businesses that don’t have substantial assets to offer as security.
Remember, however, that while you’re not risking specific assets, your business is still on the hook to repay the advance.
Flexible Repayment Plans
Card Machine loans have a distinct advantage regarding repayment – it’s inherently flexible. Because the repayments are based on a percentage of your daily card transactions, they naturally rise and fall with your business revenue.
So, if you have a slow month, your repayments will be lower. On the other hand, if you have a bumper month, you’ll repay the advance more quickly.
This dynamic payment structure can ease the strain on cash flow during slower business periods.
In the next section, we’ll balance this discussion by taking a closer look at the potential downsides, which are important to consider before deciding on this financing option.
1. What is a Card Machine Loan?
An MCA is a type of business financing where a company receives a lump sum of money in exchange for a portion of its future card sales. The amount is repaid through a percentage of the business’s daily card transactions.
2. How fast can a business get funds with a card machine loan?
One of the key advantages of an MCA is the quick access to funds. Once approved, a business could receive the cash advance within a few days.
3. Do you need good credit for a Card Machine Loan?
No, you don’t necessarily require a good credit score. Approval is mainly based on the business’s card transaction volume rather than credit scores or financial history. This makes this type of finance an accessible form of finance for businesses with less-than-perfect credit.
4. Do you have to provide collateral for an card machine loan?
No, they are unsecured, meaning they don’t require any assets as collateral. This is a significant advantage for businesses without substantial assets to offer as security.
5. How are card machine loans repaid?
Repayment is unique. Instead of fixed monthly payments, the business repays the advance through a percentage of its daily card transactions. This means repayments fluctuate along with the business’s card sales, offering a degree of flexibility.
Working in partnership with our lending partners backed by the British Business Bank to deploy funds to support business growth and working capital
