MCA Guide

Is Merchant Cash Advance Worth It? UK 2025

Honest analysis: When MCA's 25-35% cost is worth it vs when it is a terrible idea. Real scenarios, costs compared, and alternatives explained.

25-35%
MCA cost
24-48hr
Speed
60-70%
Cheaper loans
Flexible
Repayments

Quick Answer

MCA is worth it IF: You need money in 24-48 hours, bank declined you, or the opportunity cost exceeds the high interest. NOT worth it if you can get traditional loan (60-70% cheaper) or can wait for funding.

Worth It For:
  • • Emergency funding needs
  • • Bank declined applications
  • • Time-sensitive opportunities
  • • Seasonal businesses
Not Worth It For:
  • • Good credit (get loan instead)
  • • Non-urgent funding
  • • Very new businesses
  • • Refinancing existing debt

The Real Cost of MCA

Let us be honest: MCAs are expensive. Here is what you are really paying:

£20k advance
Pay back: £25k-£27k
£5k-7k cost
£50k advance
Pay back: £62.5k-£67.5k
£12.5k-17.5k cost
£100k advance
Pay back: £125k-£135k
£25k-35k cost

Compare to Traditional Loan

£50k traditional loan at 8.9% APR over 2 years:
Total repayment: £54,580
Interest cost: £4,580 (9%)
MCA costs £8,000-£13,000 MORE

When MCA IS Worth It (Real Scenarios)

Scenario 1: Emergency Equipment Repair

Situation
Restaurant walk-in fridge breaks. Replacement costs £15k. Without it, you lose £2,000/day in spoiled food and cannot operate.
MCA Cost
£15k at 1.25x = £18,750 (£3,750 cost over 6 months)
Alternative
Wait 2 weeks for bank loan at £1,200 cost BUT lose £28,000 in sales (14 days × £2k/day)
VERDICT: MCA worth it. Pay £3,750 to avoid £28,000 loss.

Scenario 2: Time-Sensitive Stock Purchase

Situation
Supplier offering 40% discount on £50k inventory order if you buy this week (cash only).
MCA Cost
£50k at 1.25x = £12,500 cost
Savings from discount
40% of £50k = £20,000 saved
VERDICT: MCA worth it. Net gain £7,500 (£20k discount - £12.5k MCA cost).

When MCA is NOT Worth It

Scenario 3: Non-Urgent Expansion

Situation
Want to open second location in 6 months. Need £80k for fit-out.
MCA Cost
£80k at 1.28x = £22,400 total cost
Alternative
Wait 3 weeks for Funding Circle loan at 9.5% = £7,600 cost over 3 years
VERDICT: MCA NOT worth it. Waste £14,800 for no time benefit.

Scenario 4: Refinancing Existing Debt

Situation
Have £40k existing loan at 12% APR, thinking of MCA to pay it off early.
Current cost
£40k at 12% = £4,800/year interest
MCA cost
£40k at 1.30x = £12,000 cost (over 8 months)
VERDICT: Terrible idea. Pay £7,200 MORE to refinance. Never use expensive debt to pay off cheaper debt.

When to Use MCA vs Alternatives

Use MCA When:

Speed critical
Need money in 24-48 hours, cannot wait
Bank declined
Poor credit, short trading history, seasonal revenue
Opportunity cost high
Profit opportunity exceeds MCA interest cost
Flexible repayment needed
Seasonal business where sales vary 50%+
No personal guarantee wanted
MCA protects personal assets

Use Traditional Loan When:

You have good credit
Will qualify for 6-12% APR (vs MCA rate of 25-35%)
Can wait 1-2 weeks
Not time-sensitive, save 60-70%
Want lowest total cost
MCA is never the cheapest option
Large amount (£100k+)
Long-term loans much cheaper for big amounts

Frequently Asked Questions

Is merchant cash advance worth it?
MCA is worth it IF you need money in 24-48 hours, bank declined you, or the opportunity cost exceeds the high interest. NOT worth it if you can get traditional loan (60-70% cheaper) or can wait for funding.
How much does MCA cost?
Typical MCA cost: 25-35% of the advance amount. £50k advance costs £12.5k-£17.5k, vs traditional loan at 8.9% APR costs £4,580 over 2 years. MCA costs £8,000-£13,000 more.
When should I use MCA instead of a loan?
Use MCA when speed is critical (24-48 hours needed), bank declined you, opportunity cost is high, or you need flexible repayments. Use traditional loan when you have good credit, can wait 1-2 weeks, or want lowest cost.
Can I pay off MCA early?
Yes, most MCA providers (iwoca, YouLend, 365 Finance) allow early repayment with no penalty. Paying off early saves you money on remaining factor rate costs.

Conclusion

MCAs are worth it in specific situations: Emergencies, time-sensitive opportunities, bank declines, or seasonal businesses. The 25-35% cost is justified by speed (24-48hrs vs weeks) and flexibility.

MCAs are NOT worth it if you can get traditional loan (good credit, can wait) or the funding is not urgent. You are paying 3x more for speed you do not actually need.

Key insight: MCA cost is not just the factor rate - it is the opportunity cost of not getting cheaper alternatives. Always compare before accepting any offer.

Get MCA Quotes + Cheaper Alternatives

See MCA options AND traditional loans. Choose what is actually worth it for YOU.

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Is Merchant Cash Advance Worth It UK 2025? Pros, Cons & Real Costs | CapExpand