Merchant cash advance repayment percentage: how it works and what to expect
By Helm, Business Funding Specialists
- The repayment percentage is the fixed share of each card transaction that goes towards your advance
- Typical percentages range from 5% to 20% of daily card revenue
- A lower percentage means slower repayment but more daily cash retained
- The percentage does not change the total amount you repay, only the speed
When you take out a merchant cash advance, two numbers determine your repayment experience: the factor rate and the repayment percentage. While the factor rate sets the total cost, the repayment percentage controls how quickly you pay it back.
Getting the repayment percentage right is crucial. Set it too high and your daily cash flow takes a hit. Set it too low and repayment stretches out longer than necessary.
What is the repayment percentage?
The repayment percentage is the proportion of each card transaction that is automatically deducted to repay your advance. If your repayment percentage is 10% and you process £1,000 in card sales today, £100 goes towards your advance and you keep £900.
This percentage is agreed at the outset and remains fixed throughout the life of the advance. It applies to every card transaction until the total repayable amount has been collected.
Typical repayment percentages
Most merchant cash advance providers set the repayment percentage somewhere between 5% and 20%. The exact figure depends on several factors.
| Percentage range | Repayment speed | Best for |
|---|---|---|
| 5% to 8% | Slower (9 to 18 months) | Businesses with tight margins or seasonal revenue |
| 9% to 12% | Moderate (6 to 12 months) | Most small and medium businesses |
| 13% to 20% | Faster (3 to 8 months) | Businesses with high margins wanting quick clearance |
How the percentage affects your cash flow
The repayment percentage has a direct impact on how much cash you retain from each day's trading. Understanding this impact helps you plan your working capital.
Consider a business processing £2,000 per day in card sales. At a 10% repayment rate, £200 goes to the advance and you keep £1,800. At 15%, £300 goes to the advance and you keep £1,700. Over a month, that difference of £100 per day adds up to £3,000 in extra cash retained.
| Daily card revenue | At 8% | At 10% | At 15% |
|---|---|---|---|
| £1,000 | £80 repaid | £100 repaid | £150 repaid |
| £2,000 | £160 repaid | £200 repaid | £300 repaid |
| £10,000 | £400 repaid | £500 repaid | £750 repaid |
What determines your percentage?
Providers consider several factors when setting your repayment percentage.
- Your average daily and monthly card transaction volume
- The advance amount relative to your revenue
- Your business sector and typical profit margins
- Your trading history and consistency of card revenue
- Whether you are a new or returning customer
Can you negotiate the percentage?
In many cases, yes. Some providers offer a choice of repayment percentages, allowing you to balance speed of repayment against daily cash flow. A higher percentage clears the advance faster, while a lower one preserves more working capital.
If cash flow is your primary concern, it is worth asking whether a lower repayment percentage is available. The total amount you repay stays the same regardless of the percentage. Only the timeline changes.
Does the percentage change the total cost?
No. The total cost of a merchant cash advance is determined by the factor rate, not the repayment percentage. If you borrow £10,000 at a factor rate of 1.3, you repay £13,000 regardless of whether the percentage is set at 8% or 15%.
The repayment percentage only affects the speed at which you reach that total. A higher percentage means you get there faster. A lower percentage means it takes longer. But the destination is the same.
Frequently asked questions
What is a good repayment percentage for a merchant cash advance?
For most businesses, a repayment percentage between 8% and 12% offers a good balance between manageable daily cash flow and reasonable repayment speed. The right percentage depends on your margins and revenue consistency.
Can the repayment percentage change during the advance?
The repayment percentage is typically fixed for the duration of the advance. It does not change based on your performance or market conditions.
What happens if my card sales drop significantly?
Your repayment amount drops proportionally. If you process fewer card sales, less money is collected. The percentage stays the same, but the actual pound amount decreases.
Is a lower repayment percentage always better?
Not necessarily. A lower percentage preserves more daily cash flow but extends the repayment period. If you want to clear the advance quickly and have healthy margins, a higher percentage could be more suitable.