How funding repaid from card takings affects your cash flow

01

How does business funding repaid through card takings work?

It is a lump sum paid to your business up front. You repay a fixed total, made up of the amount advanced plus a fixed fee, by giving up an agreed percentage of your daily card sales until the balance reaches zero.

DOJO offers this as DOJO Business Funding, in partnership with YouLend. DOJO describes it as a cash advance with a fixed fee agreed upfront, repaid automatically as a share of your daily card takings. It is repayable money, not a grant.

In outline, the provider assesses your application and makes an offer. If you accept, the funds are paid and repayment is collected from your card sales until the total is cleared. Strong trading clears the balance sooner and quiet trading takes longer, so ask what happens to the fixed fee if you repay faster or slower than expected.

02

How is it different from a bank loan?

A bank loan usually charges interest and is repaid in fixed instalments over a set term. Card-linked funding charges a fixed fee and takes an agreed share of daily card sales, so repayments rise and fall with your trading.

The GOV.UK Start Up Loan shows what a fixed-term loan can look like: £500 to £25,000 at a fixed 7.5% a year over 1 to 5 years, with no early repayment fee, but with a credit check. Rates change, so check the current page. Neither type is better in every case. A loan suits a purchase with a clear payback period. Card-linked funding suits money that mostly arrives by card and moves with the seasons.

03

How do I work out what it really costs?

Subtract the amount advanced from the total repayable, then divide by the amount advanced. That gives the cost per £1 borrowed. Use it to compare offers, because a single APR figure does not fit repayments that move with your sales.

1. 01
   Get three figures in writing

   Ask for the amount advanced, the fixed fee and the total repayable. Do not rely on a headline rate.

2. 02
   Work out the cost per £1

   Total repayable minus the amount advanced, divided by the amount advanced.

3. 03
   Estimate how long it will takeFull step in the download ↓
4. 04
   Weigh it against the benefitFull step in the download ↓
5. 05
   Compare like with likeFull step in the download ↓

Why not just use APR? An APR assumes regular payments over a fixed term. With sales-linked repayments there is no fixed term, so a fixed fee is a higher annual rate if the balance clears quickly and a lower one if it takes longer. Outside regulated lending an APR may not be shown, so ask for the total repayable.

04

What happens to my repayments in a quiet month or a busy one?

Because repayment is a percentage of card sales, a quiet month repays less and a busy month repays more. The total stays the same, so the time to clear the balance changes. Check the offer for any minimum payment or maximum term.

The share comes out of takings before you pay for stock, wages and rent. If your margin is thin, it can take a large share of your profit. Test it against a quiet-month figure, not an average, and check how long the balance would take to clear.

05

Who is card-linked funding likely to suit, and who is it not for?

It tends to suit businesses that take most income by card, trade seasonally and want to fund a planned investment. It suits less well businesses paid mainly by bank transfer, with thin margins, or needing cheap long-term borrowing.

Repayment comes out of card sales, so it works where most money arrives by card and a planned spend should pay back through extra sales or savings. It works less well where there are few card sales to repay from, or margins are too thin to give up a daily share.

DOJO presents the product as an offer for its own merchants, with a minimum trading history of 3 months. If you plan to change card provider, ask the funder what that means for repayments.

06

Is card-linked funding regulated, and what protections do I have?

It depends on how the product is structured and who borrows. YouLend says its merchant financing is not regulated by the FCA, although YouLend Limited is an FCA-authorised payment institution. Some protections may still apply, so ask what covers you.

The FCA does regulate some business lending. It says lending of £25,000 or less to a sole trader or small partnership falls within its perimeter, while lending to limited companies, and director guarantees for company borrowing, fall outside it. GOV.UK says a firm offering credit to a sole trader, or to a partnership with fewer than four partners, probably needs FCA authorisation.

YouLend's regulatory page says its merchant financing is "not regulated by the FCA for the purpose of providing business financing". DOJO's offer is made with YouLend, so confirm the contracting party and legal structure in your offer documents.

The Financial Ombudsman Service can help micro-enterprises (fewer than 10 staff and turnover or balance sheet under €2 million) and small businesses (turnover under £6.5 million, with a balance sheet under £5 million or fewer than 50 staff). Complain within 6 months of the final response. Whether it can hear a complaint about a given unregulated product depends on its rules, so check first. Regulation changes, so check the latest position.

07

What will the lender look at, and can I be turned down?

Yes, you can be turned down. DOJO says it looks at card transaction history, business performance and credit information, and that the amount offered depends on that assessment. A headline maximum is not a promise of that amount.

DOJO says YouLend uses a soft search that does not affect your credit score. Read the application disclosure to see which searches are made.

08

What should I check in the offer before I sign?

Check the total you will repay against the amount advanced, how repayment is calculated, and who is liable if trading falls short. Get every answer in writing before you accept.

Personal guarantees deserve a careful read. The FCA has said director guarantees for limited company borrowing sit outside its perimeter. The Financial Ombudsman Service can look at complaints from individuals who personally guaranteed a business loan, but only where that was done on or after 1 April 2019.

Read the full agreement, not just the summary, and take advice if anything is unclear.

09

How do I compare it with other finance and choose?

Compare on the same basis: amount received, total repaid, how long repayments last, what happens in a quiet month, who is liable if it goes wrong, and what protections apply. Then pick the structure that matches how the money will pay back.

Other options include bank loans, overdrafts, asset finance and Start Up Loans. DOJO also describes Flex Funds, a separate product offered with Liberis, as a replenishing facility for short-term cash flow, while Business Funding suits a larger one-off investment.

The Lending Standards Board's business lending standards are industry standards recognised by the FCA, covering SMEs with turnover up to £25 million. They are not FCA rules, so ask whether a lender follows them.

Reeve Consult is an authorised DOJO partner, not a lender, and may receive a referral fee if you take out a DOJO product through us. The funder decides whether you are approved. This guide is not financial advice.