MCA for limited companies vs sole traders: what is the difference?
By Helm, Funding Specialist
- Both limited companies and sole traders can apply for an MCA
- The application process is similar for both business structures
- Limited companies may access slightly larger advances
- Sole traders using personal bank accounts can still qualify
- Neither structure requires a personal guarantee for an MCA
One of the most common questions we hear is whether business structure affects your ability to get a merchant cash advance. The short answer is that both limited companies and sole traders can apply, but there are some differences worth understanding.
This guide covers how the process works for each structure and what you need to know before applying.
Can sole traders get a merchant cash advance?
Yes. Sole traders are eligible for a merchant cash advance as long as they process card payments through a card terminal or online payment gateway. The key requirement is consistent card transaction revenue, not your business structure.
If you are a sole trader using a personal bank account for business, you can still apply. Providers will look at your card processing data to determine your eligibility and advance amount.
Can limited companies get a merchant cash advance?
Yes. Limited companies are fully eligible for a merchant cash advance. In fact, the formal company structure can sometimes work in your favour because it provides clearer separation between personal and business finances.
Providers will assess your company's card transaction history and may also check your Companies House filing to verify your business details.
Key differences by business structure
While the core product is the same, there are some practical differences.
| Factor | Sole Trader | Limited Company |
|---|---|---|
| Eligibility | Yes, with card revenue | Yes, with card revenue |
| Documentation | Personal ID, card statements, bank statements | Company details, director ID, card and bank statements |
| Advance amounts | Based on card revenue | Based on card revenue, sometimes higher |
| Personal guarantee | Not required | Not required |
| Liability | Personal liability for all debts | Limited to company assets |
| Tax implications | Report as business income | Corporation tax applies |
Does business structure affect how much you can borrow?
The advance amount is primarily determined by your monthly card revenue, not your business structure. A sole trader processing £20,000 per month in card sales will receive a similar offer to a limited company processing the same amount.
However, limited companies with multiple directors or a longer trading history may occasionally be offered slightly more favourable terms, as the company structure provides an additional layer of credibility.
Tax considerations
The tax treatment of a merchant cash advance can differ depending on your business structure. Since an MCA is not a loan, the tax implications relate to how you account for the cost of the advance.
Sole traders should speak to their accountant about recording the factor rate cost as a business expense. Limited company directors should consult their accountant about the corporation tax treatment. In both cases, professional tax advice is recommended.
Partnerships and LLPs
Partnerships and Limited Liability Partnerships can also apply for merchant cash advances. The process is similar to a limited company application, though the provider may need consent from all partners before proceeding.
The advance would be taken out in the name of the partnership, and repayments would be deducted from the business card transactions as normal.
Frequently asked questions
Do I need a business bank account to apply?
A business bank account is preferred, but sole traders using a personal account for business can still apply. The provider will focus on your card processing data.
Is the factor rate different for sole traders?
Factor rates are based on your risk profile and card revenue, not your business structure. A sole trader with strong card revenue may receive the same rate as a limited company.
Can a new limited company get an MCA?
You typically need at least three months of card transaction history regardless of your business structure. A newly incorporated company without this history may need to wait.
Does my business structure affect repayment?
No. The repayment percentage works the same way for all business structures. A fixed percentage of your daily card sales is deducted automatically.