Can charities and nonprofits get a merchant cash advance?
By Helm, Funding Specialist
- Charities that process card payments may qualify for an MCA
- Charity shops and event-based organisations are the strongest candidates
- The funding must be repaid through card transaction revenue
- Not all MCA providers work with nonprofits, so check before applying
- Funds can cover operational costs, events, or facility improvements
Charities and nonprofit organisations face many of the same cash flow challenges as commercial businesses. Grant funding can be unpredictable, donations fluctuate, and operational costs are constant. For charities that generate income through card payments, a merchant cash advance could provide a flexible funding option.
This guide explains how MCAs work for charities and what you need to know before applying.
Which charities can access an MCA?
Not all charities will qualify for a merchant cash advance. The key requirement is regular card payment processing. Charities that are most likely to qualify include:
- Charity shops processing card sales through a terminal
- Event-based organisations selling tickets by card
- Social enterprises with a commercial trading arm
- Nonprofits running cafes, gift shops, or visitor attractions
- Organisations that accept regular card donations through a payment terminal
How an MCA works for a charity
The mechanics are the same as for any other business. The charity receives a lump sum upfront and repays it through a percentage of daily card transactions. The repayment adjusts automatically with your card revenue.
For charity shops that trade six or seven days a week with consistent card sales, this model can work very effectively.
What can the funds be used for?
There are no restrictions on how MCA funds are spent. Charities might use the funding for:
- Refurbishing charity shop premises
- Funding a fundraising event or campaign
- Covering operational costs during a quiet period
- Purchasing stock or equipment for trading operations
- Investing in marketing or awareness campaigns
- Bridging the gap between grant applications
Things to consider
Before applying for an MCA as a charity, there are some important factors to think about.
- Ensure your trustees or board are aware of and approve the funding
- Check that your governing document allows commercial borrowing or advances
- Consider whether the repayment percentage is sustainable alongside your operating costs
- Not all MCA providers work with charities, so check eligibility before applying
- Keep records of how the funds are used for your annual reporting
Eligibility requirements
To qualify for a merchant cash advance, your charity or nonprofit typically needs:
- At least three months of card transaction history
- A minimum of £10,000 in monthly card transactions
- A UK-registered organisation with an active card terminal
- Board or trustee approval for the funding arrangement
Frequently asked questions
Do online donations count as card transactions?
If donations are processed through a card payment gateway on your website, they may count towards your card revenue. Check with your MCA provider for their specific requirements.
Is an MCA a loan for accounting purposes?
No. An MCA is technically a purchase of future receivables, not a loan. However, you should consult your charity accountant about the correct way to record it in your accounts.
Can a CIC get an MCA?
Community Interest Companies that process card payments can apply for a merchant cash advance, as they operate as commercial entities with a social purpose.
Will an MCA affect our charitable status?
An MCA should not affect your charitable status. However, check your governing documents and consult your trustees to ensure commercial funding arrangements are permitted.