Can you take a repayment holiday on a merchant cash advance?
By Helm, Funding Specialist
- MCAs do not offer formal repayment holidays like traditional loans
- Repayments automatically reduce when card sales are lower
- On days with no card transactions, no repayment is taken
- The flexible model acts as a built-in safety net during quiet periods
- Contact your provider if you face extended periods of no trading
One of the most common questions business owners ask about merchant cash advances is whether they can take a break from repayments. If you are used to traditional loans, the idea of a repayment holiday feels familiar. With an MCA, the concept works a little differently.
This guide explains how the MCA repayment model handles quiet periods and what happens if your business experiences a significant drop in card revenue.
How MCA repayments work
A merchant cash advance is repaid through a fixed percentage of your daily card transactions. This percentage, sometimes called the split, is agreed at the start of the advance. It typically ranges from 10 to 20 percent of your daily card sales.
Because repayments are tied directly to your card revenue, they adjust automatically. Busy days mean higher repayments, and quiet days mean lower repayments.
What happens on days with no card sales?
If your business has a day with no card transactions, no repayment is taken. The percentage is calculated on your actual card revenue, so zero card sales means zero repayment. This is one of the key advantages of an MCA over fixed-payment finance products.
For businesses that close one or two days a week, this means you naturally avoid paying on non-trading days.
Is a formal repayment holiday available?
Most MCA providers do not offer a formal repayment holiday in the way that a bank might with a traditional loan. However, the flexible repayment structure effectively provides the same benefit.
During quiet trading periods, your repayments drop proportionally. During extended closures, such as a planned holiday shutdown, your repayments will pause entirely because there are no card transactions to take a percentage from.
Seasonal businesses and quiet periods
If your business is seasonal, you may have weeks or months where card revenue is significantly lower than your peak. The MCA model is designed for this. Your repayments will naturally reduce during slower periods, and you will not be penalised for lower trading volumes.
This built-in flexibility is one of the main reasons seasonal businesses choose merchant cash advances over fixed-repayment products.
What if you stop trading temporarily?
If you need to close your business temporarily, for example for renovations or personal reasons, you should contact your MCA provider as soon as possible. While no repayments will be taken during the closure, most providers will want to understand the situation and agree a plan.
Open communication with your provider is always the best approach. Most are understanding about genuine temporary closures and will work with you.
Tips for managing cash flow during quiet periods
Even though MCA repayments flex naturally, there are steps you can take to manage your cash flow during quieter months.
- Build a cash reserve during your busiest months
- Review your repayment percentage to ensure it is comfortable
- Plan major expenses for after your peak trading period
- Use quieter months to invest in marketing for the next busy period
- Keep your provider informed if you expect a significant change in revenue
Frequently asked questions
Will I be charged a penalty for low repayments?
No. There are no penalties for low repayment amounts. Your repayments are simply a percentage of your card sales, so they reduce naturally when your revenue is lower.
Can I request a lower repayment percentage?
The repayment percentage is agreed at the start of your advance. If you are struggling, contact your provider to discuss your situation. Some may be able to adjust the split in certain circumstances.
What happens if I close my business permanently?
If your business closes permanently, you should contact your provider immediately. The outstanding balance will need to be discussed and resolved, but the process varies by provider.
Do MCA repayments stop on bank holidays?
If your business does not trade on bank holidays and processes no card transactions, no repayment will be taken on those days.