A top-up gives you more money while you are still repaying a merchant cash advance (MCA) or other business advance. Usually the new deal settles what you still owe on the old one, and you receive the difference. You then repay one new total. A second advance running alongside the first means two deductions at once, which is much harder on your cash flow.
Why the old balance is usually settled first
The South African SME Finance Association (SASFA) Code of Conduct says that when new funding is paid out, existing SME finance "obligations are to be settled". That rule, in section 2.6 of the code, sits under risk assessment and applies to SME finance generally, not only to cash advances.
SASFA's code applies to its members. SASFA lists them on its website (sasfa.net/members), and you can complain to SASFA at [email protected].
In practice, that means:
- From the same funder: the funder pays off the old balance from the new advance, and pays you the rest. One card machine provider, for example, says your current advance "is closed and the outstanding balance is added to your new advance".
- From a different funder: ask how the old advance will be settled, so only one funder is collecting from your takings.
Two funders taking a share of the same card takings, or two fixed deductions from the same account, can leave too little for the business to run on. That's why our cash advance page says it may not suit you if you're already repaying another daily or weekly deduction.
What to check before you top up
- How much of the new money is new? Ask for the settlement figure on the old advance and the cash you will actually receive.
- Is there a discount for settling early? Some funders publish one. Ask whether yours gives you a discount on what's left of the old advance.
- What is the new total you will repay, in rand? Compare it with what you still owed on the old one, plus the new cash you get. A top-up can carry a new fee on the whole amount, not just the new money.
- What is the new repayment? A bigger advance usually means a bigger share of your takings, or a bigger fixed deduction, or a longer term.
- Why do you need more? If it's for stock before a busy season, fine. If it's because the first advance left the business short, a bigger one may make that worse.
Card-split and fixed advances
With a card-split advance, a set share of your card takings goes to the funder until the agreed total is paid. SASFA's Code (2018) describes this version as a purchase of future card receivables, not a loan.
A fixed-repayment advance is set out differently by each funder, and the agreement states its legal structure. Read the new agreement in full.
A top-up is normally a new agreement. One card machine provider, for example, closes the old advance and adds what is left to the new one, with a new fee on the whole amount.
When a top-up may be offered
How far into an advance you need to be before a top-up is offered varies by funder. One bank, for example, says you "can qualify for a re-advance once 50% of the loan has been repaid". Ask your funder what its rule is.
If you are looking at a new cash advance
We can help registered Pty Ltd companies and close corporations (CCs) that have traded for at least 12 months and need from R50,000. For a cash advance, we look for turnover of at least R600,000 a year.
Next step
Read more about the Merchant Cash Advance, or check your fit and tell us what you are repaying now. It takes about 2 to 3 minutes and needs no documents to start.
Sources
- sasfa.net: : 2.6 other SME finance "obligations are to be settled
- sasfa.net: : member list
- sasfa.net: : members "prescribe to the Code of Conduct" and "undergo an audit to validate adherence
- sasfa.net: card-split MCA as a purchase of future card receivables, not a loan
- support.yoco.help: : re-advance, "your current Yoco Capital advance is closed and the outstanding balance is added to your new advance
- capitecbank.co.za: : "You can qualify for a re-advance once 50% of the loan has been repaid
- gotyme.co.za: : "Early settlement may qualify you for a discount, and with GoTyme Business there are no penalties for settling early." Not named on the page