Merchant finance: All you need to know

Looking to grow your business? Or just need a little extra working capital to keep your business moving? 

Our small business loans are available between £5,000 – £500,000 for almost any purpose.

We’re not a bank. Our lending criteria is different, and we look at more than just your credit profile.

Check your eligibility online in just two minutes, with no impact on your credit score, and you could receive your funds in as little as 24 hours.

How does the business loan work?

Unlike a traditional loan, Capify’s is paid back in very small amounts regularly. The repayments are completely automated so you don’t need to do anything. Many business owners love our regular payments, because they don’t have to save a large amount by a fixed date each month.

To be eligible for a business loan, you'll need to:

The benefits of a Capify business loan

A merchant is a business that offers specific goods, like a retailer. If you, like millions of other people, dream of becoming your own boss, what’s holding you back? The chances are the answer is either lack of money to get your business off the ground, or confidence to “go it alone”. Possibly, even a combination of both is strangling your entrepreneurial vision, even though you have a great idea for a product or service to sell. 

Securing finance for a start-up business is not easy – but it is within the reach of most people, if they know where to look and how to apply. The most recent figures available from the Government show that in 2017 in the UK, there were 382,000 “business births”. (source:

That’s a lot of people like you, who have found the initial cash they need to create their own business. If you can’t self-fund your venture, this guide provides tips on obtaining finance for a small business, so you can join them soon!

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Finding merchant finance for a small business

The sources of start-up cash for businesses are many and varied. It all depends on the type of enterprise you have in mind, the level of lending you need and the level of risk  you are prepared to manage.

We provide other guides that go into detail about sources of finance for start-up businesses, but it includes business loans from banks and other lenders, loans and grants provided by government-backed schemes, and alternatives such as crowdfunding, business angels and going into partnership.


Qualifying for merchant finance

Knowing sources of finance for a start-up business – or for a second wave of funding – is only half the battle.

You also need to ‘set out your stall’ to improve your chances of hearing a “yes”!

Getting approved for merchant finance can be less stressful if you ask in the right places. It can be demotivating and a waste of time if you apply for start-up funding and get the door shut in your face. First, review each potential source of merchant  finance, and make sure you qualify.

For example, some public sector loans and grants available for start-ups are geared towards business to business enterprises. They won’t be interested if you are a business that trades direct to the public,like shops or services for homeowners.

Some loans and grants are specific to a region, or to a business sector such as technology.

Banks and other mainstream lenders will generally consider any viable business proposition. (They will need to see a well thought out business plan, and projections for your financial management – there’s more on this below.)

Getting approved for merchant  funding will also involve outlining your personal financial history. 

Some mainstream lenders are reluctant to risk their money if you have already built up a considerable debt (see credit score below).

Review qualification criteria carefully for each type of lender, then create a hit list of the business finance sources that offer you the best chance of success.

What does pre-approved for merchant finance mean?

If you need to be 100% sure of getting enough start-up capital before you begin trading, it is possible to approach lenders with a business plan that shows an intent to launch a venture in the near future.

If this plan – and your confident presentation – wins their backing, your lender may give you “pre-approval” for finance. This shows they are prepared to invest in your start-up when you are ready to activate the loan and begin trading. 

Getting approved for merchant finance

What sort of things do potential business lenders look for when considering start-up finance?

Reference has already been made to how your personal financial status will be considered when you’re obtaining finance for a small business.

The basic thing they need to know is whether the business loan will offer the bank, organisation or individual a good return on their investment. They want to know if this business is going to be profitable and will you be able to pay them back with interest.

Just a vision for a great product and service and lots of exciting marketing plans won’t be enough. They want facts and figures.

For example, they will want to know your projected spend on equipment and all your outgoings. 

How has your product or service been priced up, and what margin of profit will you have? How many units, or hours of work, will you need to sell to break even or start making a profit?

If you already have a full order book and a queue of customers, that’s great. However, if the amount your business is spending on its stock, premises, salaries and other outgoings is too high, you could still make a loss!

The other things that can help you to get a green light when obtaining finance for a small business include your existing experience and a good understanding of your potential customers. You need to show research into whether there is a demand for what you are selling. 

For instance, you may dream of being a Life Coach, but are there 20 others locally who are more established, or do you live in an area where few people would feel the need for your services?

If you have worked for someone else for many years as a chef, you might want to set up a restaurant or food truck where there is a gap in the market. This is the sort of information that makes finding finance for small business easier.

More important tips on applying for merchant finance

There are various red flags that organisations – and individual investors – look for when assessing their likely returns on a business loan. It’s the sort of thing that can sink your application for start-up funds.

They will want to be sure you’ve done your sums thoroughly, and the amount of finance you are applying for (added to the existing cash you have) will keep the business trading not just on day one, but also through its tricky first few months.

Applying for too little can look as suspicious as applying for too much!

Also, earlier we mentioned that making a target list of potential start-up funding sources makes sense. This is also important to your credit score.

When potential lenders review your application they will ask your permission to check your credit history. A refusal will make them highly suspicious. Your credit history or score is a measure of such things as paying bills on time and having loans offered in the past.

If you have not handled debt well – or you have been turned down for loans – it can count against you when applying for business start-up finance.


What if you are refused merchant finance?

When finding finance for small businesses, don’t be put off when your loan applications are turned down. You could see this as a delay to becoming your own boss, rather than a complete brick wall.

There are various steps you can take to improve your chances of getting start-up funds the next time you apply.

For example, keep on top of paying your bills and manage any debts wisely, to improve your credit score over a three to six month period.

Save hard, or approach alternative lenders to get some cash behind your business idea. Even if you need to top this up by obtaining merchant finance, the fact you already have some business capital will count in your favour.

You could also ask for feedback from the lender who said no. Was it your business plan – or specifically your financial projections – they didn’t like? It may be possible to revise your business plan, make it more realistic and lower the risks, to improve your chances of a successful application for start-up cash next time.

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