Merchant cash advance, explained

If your business runs on tap-and-go, a merchant cash advance has a certain logic to it: borrow against the sales you’re confident you’ll make, and repay a slice of them each day. A quiet Tuesday means a small repayment; a packed Saturday means a bigger one. For the right business it takes a lot of stress out of repayments. For the wrong one, it can be an expensive habit.

What is a merchant cash advance?

It’s an up-front sum of money provided in exchange for an agreed share of your future card sales. You and the provider agree:

• The advance amount — the money you receive.
• The total repayable — the advance plus the provider’s fee, expressed as a dollar figure.
• The holdback percentage — the share of each day’s card sales that goes towards repaying it.

Repayments continue until the total repayable is reached. There’s usually no fixed end date; busy trading pays it off faster, quiet trading slower.

Who is it good for?

• Cafés, restaurants and bars with steady card volumes. See hospitality.
• Retail shops with strong point-of-sale takings. See retail.
• Salons, barbers, gyms and studios taking regular card payments.
• Businesses with uneven daily trade that would struggle with fixed weekly instalments.
• Owners without property who want something sized on actual sales rather than tax returns.

It doesn’t suit businesses that invoice customers on terms, or those with low card volumes.

How does a merchant cash advance work, step by step?

1. Enquire with your average monthly card sales and the amount you need. No credit check to enquire.
2. Sales review. The provider looks at several months of merchant statements or payment-provider data.
3. Offer. You see the advance, the total repayable in dollars and the holdback percentage.
4. Funding. The advance is paid to your business account.
5. Automatic repayment. A share of each day’s card sales is directed to the provider.
6. Done. Once the total repayable is reached, the deductions stop.

What are the pros and cons?

Pros	Cons
Repayments flex with your trading	Usually costs more than a standard loan
No fixed weekly instalment to dread on quiet days	The total repayable is fixed even if you repay quickly
Sized on real card sales, not tax returns	Only suits card-heavy businesses
No property security required	Daily deductions reduce everyday cash
Often quick to arrange with clean merchant data	Taking a second advance before the first is cleared can snowball

How do you work out the real cost?

Because the cost is usually expressed as a fixed fee or factor rather than an interest rate, it’s easy to underestimate. Do this simple check:

1. Total repayable minus the advance = the cost in dollars.
2. Estimate how long it will take to repay at your normal sales.
3. Compare that dollar cost against an unsecured loan or line of credit for the same amount and period.

Repaying quickly doesn’t usually reduce the fee — so a merchant cash advance used for a short gap can work out comparatively expensive. Ask for any early-payoff terms in writing. ASIC’s guidance on unfair contract terms for small businesses is also worth knowing about when reviewing standard-form agreements. If you’d like an honest comparison with other options, let us run the numbers with you.

What does it look like in practice? (illustrative)

A busy Melbourne café wants to replace its tired espresso machine and grinder and add a small outdoor seating area before spring. Its card takings are strong and steady, but winter weekdays are slow. A merchant cash advance means repayments are smaller on wet Mondays and larger on sunny Saturdays. The owner compared the total repayable with an equipment finance quote for the coffee machine and chose a mix: equipment finance for the machine, and a smaller advance for the seating. Illustrative only.

When should you avoid a merchant cash advance?

• When a lower-cost option fits just as well — especially for equipment, which can usually secure itself.
• When card sales are falling and the advance is plugging an ongoing loss.
• When you already have an advance running and would be “stacking” a second one.
• When most of your income is invoices or cash, not cards.

Can you combine an advance with other finance?

Yes, and sometimes it’s the smartest mix. Many card-heavy businesses put long-life equipment on equipment finance, keep a modest line of credit as a buffer and use a small advance only for short, sales-linked needs. The thing to avoid is several overlapping advances all taking a share of the same daily takings — the combined deductions can choke everyday cash. Before taking any new facility, list every existing repayment and check the total still leaves enough for wages, rent and suppliers on a slow day.

What documents will you need?

• Several months of merchant or payment-provider statements
• Recent business bank statements
• ABN or ACN and photo ID
• Details of any existing advances or business loans

What are the alternatives?

• Business line of credit — flexible, and you only pay on what you use.
• Overdraft alternatives — the wider family of revolving buffers.
• Equipment finance — for coffee machines, ovens and fit-out equipment.
• Unsecured business loan — fixed repayments, often lower total cost.

Is a card-sales advance right for you?

For businesses with steady card takings and uneven days, a merchant cash advance can be a genuinely helpful tool — if you know its true cost and it’s the best fit for the job. We’ll show you how it compares, in plain dollars.

There’s no credit check to enquire, no handing your details around a group of lenders, and a real person reads your form and calls you. Share accurate card-sales figures and what the money is for, and we’ll match you properly. See if you qualify.