Capitalising on high demand by implementing a merchant cash advance facility

The referral

A rapidly growing online-based builders merchant was referred to Spark through Spark Connect. The business had experienced a significant surge in orders, necessitating the purchase of more stock from their overseas suppliers to meet demand.

The company:

• Recently invested in an online marketing campaign, which proved to be highly successful.
• Recognised that additional finance would greatly benefit the business but was uncertain about the best option.
• Specialises in supplying building materials via an e-commerce website/marketplace.

‍

The solution

A successful outcome would involve sourcing finance for the business that scales with their business demands, boosts cash flow, allows the business to invest in stock, and enables the ramping up of successful marketing campaigns to further grow the business.

After reviewing the business, we identified MCA (Merchant Cash Advance) as an excellent option for the business. An MCA provides an upfront cash injection that is repaid automatically every time a card payment is taken. E.g. For every £1 of card sale revenue, 10% (£0.10) is paid back towards the loan.

This was a great fit as the business generates the majority of its revenue through card sales.

‍

The result

A facility of £125,000 was agreed with the client and disbursed to the business. This has enabled the client to effectively manage the surge in demand by reinvesting revenue more rapidly (without waiting for merchant funds to be deposited into their account).

Due to the structure of an MCA agreement, repayments are proportionate to sales, meaning that during busier periods or more successful months, payments are higher, while during off-seasons, payments are lower.

By augmenting working capital and expanding stock purchases from overseas, the FX referrer benefited from increased FX transactions and a commission percentage from the deal.

‍

Challenges

Sudden growth:
‍After a super successful marketing campaign the business was experiencing overnight growth.

Lag of merchant funds:
‍The majority of sales were paid via card on their website. This meant there was a delay receiving these funds from their merchant providers.

Lack of knowledge:
‍The business owner knew that a boost in finance would help the business maintain the growth it was seeing but wasn’t sure what the best options were for his business.

‍

Steps to success

Business assessment:
‍Detailed assessments of the businesses current financial situation and requirements are completed.

Customised solution:
‍Our financial expertise and AI enable personalised solutions that match the client's requirements and objectives.

Implementation and support:
After approving the trade finance facility, ongoing support is offered to the client throughout the implementation process.

‍