Merchant loan repayments: how they work and what to expect
By Helm, Funding Specialist
- Repayments are a fixed percentage of your daily card sales
- Busy days mean higher repayments, quiet days mean lower repayments
- No card sales on a given day means no repayment
- The typical repayment percentage ranges from 10 to 25 percent
- There are no fixed monthly deadlines or manual payments
One of the biggest advantages of a merchant loan is how repayments work. Unlike a traditional loan with fixed monthly payments, a merchant loan is repaid through a percentage of your daily card transactions. This means repayments automatically adjust with your business performance.
This guide explains exactly how the process works, day by day.
How daily repayments work
When you take out a merchant loan, you agree to a repayment percentage, sometimes called a split. This is the proportion of your daily card sales that goes towards repaying the loan.
Each day, after your card transactions are processed and settled, the agreed percentage is deducted. The remaining funds go into your business bank account as normal.
Example repayment scenarios
Here is how a 15 percent repayment split would work across different daily card sales levels.
| Daily Card Sales | Repayment (15%) | You Receive |
|---|---|---|
| £500 | £75 | £425 |
| £1,000 | £150 | £850 |
| £2,000 | £300 | £1,700 |
| £3,000 | £450 | £2,550 |
| £0 (closed) | £0 | £0 |
What determines your repayment percentage?
The repayment percentage is set when you agree to the merchant loan. Several factors influence the percentage your provider offers.
- The size of the loan relative to your monthly card revenue
- Your provider's assessment of how quickly the loan should be repaid
- Your industry and typical trading patterns
- Whether you have existing financial obligations
How long does repayment take?
The repayment period depends on your daily card revenue and the repayment percentage. Most merchant loans are fully repaid within 3 to 12 months.
There is no fixed end date. You simply continue making automatic daily repayments until the total agreed amount has been repaid. If your card revenue increases, repayment speeds up. If it decreases, repayment slows down.
What happens on quiet days and holidays?
If your business does not process any card transactions on a given day, no repayment is taken. This applies to days when you are closed, bank holidays, and any day with zero card sales.
This is one of the key benefits of a merchant loan over fixed-payment products. You never have to worry about meeting a payment on a day when your business is not generating revenue.
Can you change the repayment percentage?
The repayment percentage is typically fixed for the duration of the loan. However, if you are experiencing financial difficulty, contact your provider to discuss your options. Some may be willing to adjust the split in exceptional circumstances.
When you take out a new advance or renewal, you will have the opportunity to agree a new repayment percentage based on your current situation.
Frequently asked questions
Are repayments taken on weekends?
If you trade on weekends and process card sales, repayments will be taken. If you are closed, no repayment is taken.
What if my card revenue drops significantly?
Your repayments automatically reduce because they are a percentage of your actual card sales. This built-in flexibility protects your cash flow during quieter periods.
Can I make additional payments to repay faster?
This depends on your provider. Some allow lump-sum payments towards the balance, while others only accept repayment through the daily card split.
Is the repayment percentage negotiable?
In some cases, yes. If you prefer a lower daily deduction (and are comfortable with a longer repayment period), discuss this with your provider before signing.