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Case Study

Financing a sandwich bar using Merchant Cash Advance

When conventional funding isn't an option

Finding a solution with an MCA, despite a poor credit rating.

Hospitality, including fast-food franchises, have faced particular problems in recent times. While other businesses were closed, custom for these types of businesses also dropped off a cliff - not because they had to close but simply that customers were no longer calling in for lunches. 

Our client was a fast-food franchise operator, with a shop in a busy high street in the West of England. Like many businesses, it had been hit by the downturn. The lunchtime takeaway trade that was one of the pillars of the business disappeared overnight as the lockdown forced people to work at home, or not work at all.

“Usually, the shop would have a queue outside the door at lunchtimes. It was one of the reasons that I took over the franchise. But lockdown means that people are not working, so business has dropped off - to the level where I cannot pay my bills.” 

With rent and franchise costs still to pay, he had applied to his bank for funding but found that they were not prepared to help. His own credit history was not good and the fact that he had only taken over the franchise at the beginning of the year meant that he had no evidence that his business was successful.

He turned to us at Rangewell for help.

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A funding challenge

It soon became apparent that our client's credit history was so poor that most forms of lending would not be available to him, and those lenders who might be prepared to help would expect very high rates of interest. 

We needed to find an alternative.

We always work closely with our clients, so we looked at his accounts with him. We were able to find a lender able to offer a secured loan of £25,000 - but the costs were prohibitively high and, while it might have dealt with his immediate cashflow issues, it would make his business unsustainable in the near future with large repayments in excess of his projected takings. 

Fortunately, we knew there could still be an alternative, with a Merchant Cash Advance.

What is a Merchant Cash Advance

Fixed monthly repayments are inevitable with a traditional loan. A Merchant Cash Advance - or MCA - presents no such problem.

They can be ideal for any business that receives a high proportion of their takings from card payments and provide funds without the need to make regular repayments - or, indeed, repayments of any kind.

With an MCA, the provider works with the card payment processing company and may offer a cash advance equal to your monthly card takings. They will then take a percentage of every card transaction made to the business until the cash advance, and their fees, are paid off.

The advance is paid back automatically as customers make card payments - making them particularly suitable for retailers and especially food retailers like our client, who now take the majority of their payments from cards and mobile phones.

Instead of causing problems with a fixed drain on your cashflow, the MCA will keep pace with the level of business that you do.

It means your customers repay your cash advance for you - and the more business you do and the more customers pay by card, the faster the advance is paid off. 

This made it simple to provide an advance of £12,000. It meant that, despite his poor credit record, he could have a reserve to call on while cashflow was causing problems.

“People have started heading back to work - you only have to look at the roads to see the proof of that. Things are still slow, and people are working from home if they can, and that means they are still not buying sandwiches at lunchtime in the numbers that they used to. 

We are still watching the costs as a result - but, thankfully, with an MCA it does not matter. There is no monthly payment for me to make - my customers are doing that for me.”

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How we helped

With the increased use of payment cards, there are now many lenders providing MCA funding in the UK. Their fees and the percentages they take to fund repayment will differ. Getting the agreement that is right for your individual business is essential to keep costs down.

We found the MCA provider who understood our client's sector and who was prepared to offer the most attractive fee structures, then we helped him make the necessary arrangements - which brought his business the funds it so vitally needed in a matter of days. 

Rangewell finds the financial solutions that your business needs

Whatever business sector you work in, our team can help you overcome any funding challenge you may face.

Our Business Funding Experts will be able to discuss the options and work out the most cost-effective ways to provide the funding you want.

We are independent and we know the entire lending market. That means we can take a view that will put your interests first - and if you have not been successful because of your bank’s lending policies, we will work to find one that is more sympathetic.

At Rangewell, we can help you arrange all types of business funding - including MCA arrangements. Call us if you face a funding challenge - we can help you find the answers. 

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Keeping your business afloat with help from Rangewell

  • Individual arrangements tailored to your circumstances
  • Adverse Credit – no problem
  • Repayments geared to your turnover
  • Expertise in funding for your sector
  • Bounceback and CBILS expertise

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