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Business Cash Advance

A business cash advance essentially works by a company exchanging their future sales for an immediate lump sum of money. The provider then takes a fixed percentage from their daily credit & debit card transactions until the advance is paid back in full.

Businesses with a consistent stream of credit or debit card sales, such as retail or hospitality establishments, are often the ones who can take advantage of cash advances. The main benefit is that funds can be quickly acquired, generally within a few days. However, it’s important to check if other loan options fit your needs better, due to the comparatively high interest rates and fees tied to an advance.

If your business has been trading for at least 6 months and is receiving a minimum monthly income specified by your financier via card transactions, it will qualify for a business cash advance.

A merchant ID number (MID) is the number attached to a processing account, i.e. to Lloyds / Barclays / Worldpay. It is similar to an account number on a bank account and is typically required to process credit or debit card transactions.

Businesses need a merchant ID to repay their loan because of the way business cash advances are settled, typically through the use of a card terminal that is linked with the cash advance provider. Without a merchant ID loan terms cannot be fulfilled.

The factor rate of a business cash advance is a calculation that determines the total cost of your loan – For example, a factor of 1.2 on an advance of £10,000 = £10,000 x 1.2 = £12,000. The £12,000 will be the total your business is required to pay back. The factor rate is fixed so the price of repayments do not fluctuate like interest rates.

The split % of a business cash advance is the amount each individual card sale repays to Nucleus, i.e. 20%. This means 20% of the customers daily card transactions will be sent to Nucleus’s bank account for repayment. For Clarity: Every £1 your business receives, Nucleus will receive 20 pence of the sale until your loan is paid off.

A card processor / acquirer is the financial institution that is responsible for keeping a merchant’s account in order to process card transactions. The main ones are, Worldpay, Lloyds/Cardnet, FDMS/First Data, Barclaycard, Elavon, HSBC/Global Payments, AIB. – They are necessary in order to access a business cash advance.

The business cash advance sales & purchase agreement (SPA) states the terms of the loan agreement and is signed by the director / sole trader of the business. This confirms that Nucleus will have control of their card receivables throughout the contract.

The guarantee and indemnity form of a business cash advance is the contract that the business’s personal guarantor(s) sign. It confirms that if the business does not / cannot repay their loan, the personal guarantor(s) will personally make any outstanding repayments.

The mandate form of a business cash advance is signed and completed for each merchant ID number (MID) by the customer. It instructs the card processor (i.e. Worldpay) to divert the card terminal revenue into the trust account you are using to repay your financier.

These statements are monthly breakdowns of the revenue coming through each merchant ID number. For example, October 2022’s statement may show the business took 20 transactions which totalled £10,000, in turn, the calculations of repayments for your business cash advance agreement can be made.

If your business has multiple merchant ID (MID) numbers, they will sometimes be grouped together under the ‘head MID / HQ’. Any Merchant ID numbers that sit under the Head MID / HQ are known as ‘outlets’.

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