How to Qualify for a Merchant Advance: A Quick Guide

Running a business often comes with challenges, especially when cash flow gets tight. If you’re looking for a flexible way to access funds without jumping through hoops like traditional bank loans require, a merchant advance might be just the solution. But how do you qualify for one?

What Exactly Is a Merchant Advance?

Before diving into the qualification details, let’s clarify what a merchant advance in the UK actually is. Unlike a traditional loan, a merchant advance provides upfront cash in exchange for a percentage of your future sales. It’s tailored for businesses with consistent card transactions, like retail shops, restaurants, or e-commerce businesses. Instead of monthly fixed repayments, the provider takes a cut of your daily or weekly card sales until the advance is repaid.

Now, let’s look at how to qualify.

Understanding the Basics of Qualification

Qualifying for a merchant advance is typically faster and easier than applying for a bank loan, but that doesn’t mean it’s a free-for-all. Providers will assess a few key factors before approving your application. Here’s what they’ll focus on:

1. Your Sales History

One of the first things a provider wants to see is your revenue. Since repayments are based on your future sales, they’ll need proof that your business brings in consistent card transactions. This means you’ll likely need to provide:

• Recent bank statements
• Merchant account statements (showing card payment processing)

Most providers prefer businesses that process at least £5,000–£10,000 per month in card sales. If your revenue falls short of this, you might still qualify but for a smaller amount.

2. Time in Business

How long has your business been running? While you don’t need decades of experience, most providers like to see at least 6–12 months of trading history. This helps them gauge your business’s stability and predictability. Start-ups with less than six months under their belt might face more challenges getting approved, but options still exist if your sales are solid.

3. Credit History

Good news: Your credit score isn’t the end-all-be-all here. Unlike traditional loans, merchant advances aren’t heavily reliant on your personal or business credit. That said, providers will often perform a soft credit check to understand your financial habits and flag any major red flags like unresolved bankruptcies.

If your credit score isn’t perfect, don’t stress. Strong sales and a stable business track record can often outweigh a less-than-stellar credit history.

4. Industry Type

Different industries have different levels of risk, and providers consider this when deciding on your application. High-risk industries, like those with seasonal or inconsistent sales, may face stricter qualification criteria. However, businesses with steady card payments, such as cafes, retail shops, and service providers, are usually in a good position to qualify.

5. Outstanding Obligations

Already have other loans or advances? Providers will take this into account to ensure your business isn’t overleveraged. They’ll want to confirm that taking on a new merchant advance won’t stretch your finances too thin. If you’re currently repaying another advance, make sure you have a clear repayment history to boost your chances.

How to Prepare Your Application

When applying for a merchant advance, preparation is key. Even though the process is simpler than a bank loan, it still requires you to provide accurate and complete information. Here’s what you’ll need:

• Bank statements – At least 3–6 months’ worth to prove consistent sales.
• Merchant account statements – To show card transaction volume.
• Business information – This includes your business registration details and proof of ownership.
• Identification – A government-issued ID like a passport or driving licence is usually required.

Having these documents ready in advance can speed up the process and improve your chances of approval.

Boosting Your Chances of Approval

If you’re on the fence about whether you’ll qualify, there are a few steps you can take to improve your odds:

Increase your card sales – Focus on boosting card payments, even if it’s through incentives or promotions. The more card sales you can show, the better.

Organise your financials – Make sure your bank and merchant account statements are clear, accurate, and free of inconsistencies.

Pay off existing debts – If you’re juggling multiple advances or loans, consider clearing smaller ones to improve your financial standing.

Be upfront about challenges – If your business has faced setbacks, be honest about them. Providers appreciate transparency and may still work with you if your overall sales look promising.

When Is a Merchant Advance Right for You?

Now that you know how to qualify, let’s quickly consider when a merchant advance might make sense for your business. It’s a great option if:

• You need fast access to funds—approvals can happen in as little as 24–48 hours.
• Your business has regular card sales, even if cash flow fluctuates.
• You want repayments to adjust with your income rather than being a fixed monthly expense.

However, keep in mind that merchant advances often come with higher costs compared to traditional loans. Always evaluate the terms carefully to ensure it’s a financially sound decision for your business.

Ready to Take the Next Step?

A merchant advance can be a lifeline when your business needs a cash boost, but it’s important to approach it with a clear understanding of the qualifications and responsibilities. By ensuring your sales are consistent, your financial records are organised, and your business is stable, you’ll be well on your way to securing the funding you need to keep growing.

So, what’s stopping you? Take a closer look at your sales data, get your paperwork in order, and explore your options with confidence. With the right preparation, qualifying for a merchant advance could be the next step in your business’s success story.