Quick answer
What is the simplest useful merchant cash advance comparison?
Write down the net advance, total repayment and collection percentage, then model the cash left after collections under normal and quieter sales. Add other charges and the settlement terms. The collection percentage alone does not tell you the cost of the finance.
Key points
- Cost and collection pace are different.
- Use the actual definition of qualifying receipts.
- Model the business cash remaining after collection.
- Request the settlement terms before assuming an early saving.
Put the contractual cash amounts first
Begin with the amount arriving in the company’s bank account and the total it agrees to repay. List fees outside that stated total separately. Ask the provider to point to the corresponding figures in the agreement so that a verbal explanation and written terms can be reconciled.
A collection percentage describes how much of a defined receipt stream is taken. It is not the same as the fee expressed as a share of the advance, and neither number automatically supplies a comparable annual interest measure. Keep each label attached to its own denominator.
Trace one settlement from sale to bank
Take an illustrative trading day and show gross card receipts, refunds or adjustments, processing costs, funding collection and the resulting bank settlement. Ask the payment and funding providers which events affect each line. The business needs a reconciled deposit, not two separate descriptions that cannot be joined.
The British Business Bank identifies merchant cash advances as a category tied to future card receipts [1]. The exact collection calculation is agreement-specific. If the company takes payments through several channels, establish which ones count and what changes require provider consent.
Run a normal and a quiet-month example
Assume, only for illustration, a £15,000 net advance with £18,000 total repayment and a collection of 12% of qualifying card receipts. On £25,000 of monthly receipts the collection would be £3,000; on £15,000 it would be £1,800. The £3,000 stated finance cost is a different number from either collection.
Now put normal operating outgoings underneath both scenarios. The quieter month has a lower collection but also less income to cover fixed costs. These figures do not describe an offer or establish affordability. They demonstrate the worksheet the business needs to complete with actual assumptions.
| Illustration | Normal month | Quiet month |
|---|---|---|
| Qualifying receipts | £25,000 | £15,000 |
| Assumed 12% collection | £3,000 | £1,800 |
| Receipts after collection, before other deductions | £22,000 | £13,200 |
Ask what happens when the plan changes
Check the position if the business changes payment providers, closes for refurbishment, sells the company or wants to settle early. Ask for the actual settlement calculation and any continuing obligations. Do not assume that faster repayment cancels the remaining fixed charge.
If a further advance is proposed, record how much clears the old balance and how much new cash reaches the business. Compare the total new obligation with that new cash and keep the full sequence of prior advances visible. A renewal should be assessed as another commitment.
Use one decision sheet
Keep the purpose, net advance, total repayment, receipt definition, collection process, other costs and change-of-plan terms on one page. Add links or references to the agreement clauses supporting them. Mark anything the provider has not answered.
Then compare that sheet with the company forecast and other funding categories for the same purpose. Felix can record the requirement for a conversation. The decision needs the written proposal and the company’s own cash position, not only a convenient-looking collection mechanism.
Frequently asked questions
Straight answers
Is a factor rate an APR?
No. It describes a different calculation. Ask for a clear cash schedule and do not treat unlike rate labels as interchangeable.
Does a quieter month always make the arrangement affordable?
No. Lower receipts can also leave less cash for fixed costs. Model the whole business.
Will switching card providers be unrestricted?
Do not assume that. Check the funding and collection agreements before changing the setup.
Sources and further reading
Where the external facts come from
Sources checked on 27 October 2026. Provider links are references; they do not imply a partnership or an available offer.
- British Business Bank: working capital finance ↗
Background to card-receipt-linked funding.
