Best Business Loans for Retail / Guides / Merchant cash advance for retailers: is it worth it?
Guide · reviewed 11 November 2026
Merchant cash advance for retailers: is it worth it?
Answer in brief
A merchant cash advance gives a shop a lump sum that's repaid as a fixed percentage of card takings, so you pay more in busy weeks and less in quiet ones. It's fast and flexible but can be expensive. Turn the factor rate into a total cost, and compare it with a short-term loan before you sign.
How it works
- The provider looks at your card sales.
- It offers a lump sum and a factor rate, for example 1.2.
- You repay the sum times the factor rate as a share of card takings.
Working out the cost
£20,000 at a factor rate of 1.2 means you repay £24,000. If you repay it in six months, that's a much higher annual cost than the same £4,000 over two years. Speed of repayment matters.
Questions and answers
Is a merchant cash advance a loan?
Technically it's often structured as a purchase of future card sales rather than a loan, but it works like borrowing. Treat it as such.
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