Is a merchant cash advance actually a loan?

No. A merchant cash advance is usually structured as a purchase of your company's future card or sales receipts at a discount, not as a loan. You receive a lump sum now and the funder collects an agreed total back, often as a percentage of takings or a fixed daily or weekly amount. There is no interest rate, it is not FCA-regulated, and it still costs real money.

What "not a loan" means in practice

A loan is borrowing: you owe a balance, interest runs on it, and you repay on a schedule. A merchant cash advance is a sale: the funder buys a fixed amount of your future receipts for less than face value.

That difference shows up in four places:

• Pricing. You see a factor rate (the fixed multiple you repay, like 1.35), not an interest rate. See what is a factor rate.
• Repayment. Often a holdback, meaning a set share of each day's card takings, so you pay less in a slow week. Some versions use fixed daily or weekly debits instead.
• Total cost. Fixed on day one. Repaying sooner does not usually reduce it.
• Regulation. Merchant cash advances are not loans and are not FCA-regulated. Business finance for limited companies is not regulated by the Financial Conduct Authority in any case. See is business finance regulated by the FCA.

What "not a loan" does not change

It does not make the money free or flexible by default. The funder still expects the full total back. If takings fall, a true holdback slows down, but a fixed daily debit does not. Many agreements also include a personal guarantee from the director, so read what triggers it.

Sterling's take: the label is a legal point. The cost is a maths point. Do the maths.

The cost in real terms

£10,000 at a 1.35 factor rate over 6 months, paid daily: 126 payments of £107.14, £13,500 back, £3,500 cost, about 126% APR. Scale it up and the APR stays the same: £50,000 on those terms is £67,500 back.

A term loan of £100,000 at 18% APR over 24 months, by contrast, costs £19,817.84 in interest on £4,992.41 a month. The advance is faster and more flexible on slow weeks. The loan is usually much cheaper per year. Which wins depends on how long you need the money and what it earns.

When an advance makes sense

• Card-heavy takings that swing with the season, where a holdback matches your cash flow.
• A short, specific need with a clear payback, such as stock ahead of a busy period.
• When the speed and the flex are worth the price, and you have checked the APR.

What to do next

Convert any offer to an APR in the MCA APR calculator, then read the full guide to merchant cash advances. If you want something you can draw and repay, compare it with a revolving credit facility.