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Overview
Payment-linked repayment is fundamentally different from traditional fixed-payment loans. This flexibility offers significant benefits for businesses with variable revenue, seasonal patterns, or unpredictable cash flow. This guide explains how payment-linked repayments protect and benefit your business.
The Core Benefit: Automatic Cash Flow Protection
Think of it like a speed bump versus a flexible band for your finances.
Traditional Loan: You pay a fixed amount (e.g., £1,000) every month, regardless of whether your business had a great month or a slow one.
Payment-Linked Advance (Our Model): Your payment adjusts automatically. We take a small, fixed percentage (e.g., 15%) directly from your daily sales. If your sales are high, you pay more and clear the advance faster. If your sales are low, you pay less, and your cash flow is protected.
Example Scenario: The Coffee Shop
Imagine you own a coffee shop with sales that vary widely between the busy Christmas period and the quiet winter months.
| Traditional £20k Bank Loan (Fixed Payment) | SAPI £20k Payment-Linked Advance (Flexible Payment) |
Payment Structure | Fixed payment of £2,000 every month | Fixed percentage of 15% of daily card sales |
Busy Month (December) | £15,000 Revenue → You pay £2,000 (13% of revenue) | £15,000 Revenue → You pay £2,250 (15% of revenue) |
Slow Month (February) | £5,000 Revenue → You pay £2,000 (40% of revenue!) | £5,000 Revenue → You pay £750 (15% of revenue) |
Comprehensive Cash Flow Protection
Core Protection Mechanisms
1. No Fixed Monthly Pressure: Unlike traditional loans, your payment automatically adjusts with your sales. If you have a slow day, your payment shrinks, protecting your operating cash flow from being crushed by a large fixed monthly bill.
2. Built-in Protection During Low Seasons: If your business experiences predictable slow periods (like post-Christmas or summer holidays), your repayments automatically decrease during these months, preserving cash when you need it most.
Example: An event catering business might only pay £300/month during off-peak winter months, saving over £900/month compared to a fixed loan.
3. Faster Repayment When Business Grows: If your sales exceed expectations, your repayments increase naturally. This means you clear the entire advance quicker than anticipated – without penalty – saving you time and potentially giving you access to further funding sooner.
4. Minimal Penalty Risk, Maximum Flexibility: With a traditional loan, late or missed payments result in late fees and credit damage. With a payment-linked advance, daily zero sales mean zero daily collections. The advance automatically adjusts to your revenue. However, our agreements usually include a Minimum Monthly Payment (MMP). If you foresee being unable to meet this MMP due to prolonged low sales, contacting SAPI early is essential to restructure the payment and avoid potential arrears.
Refer to Managing Cash Flow Challenges for more details.
Important Distinction: This is an automatic adjustment to daily sales, but the monthly minimum must be managed.
5. Alignment with Business Reality: Your revenue fluctuates due to seasonal patterns, economic conditions, or one-time events (weather, supply issues). Payment-linked financing accepts this reality and adjusts accordingly, rather than forcing you into a rigid, fixed payment structure that doesn't match your business cycle.
6. Preserves Working Capital in Emergencies: If an unexpected event (like an equipment breakdown) causes sales to drop, your repayment automatically shrinks. This leaves more cash in your business to handle the emergency, instead of forcing you to pay a high fixed loan payment when you can least afford it.
When Payment-linked Repayment Works Best
This model is ideal for businesses that are:
Seasonal: Repayments drop during the off-season and rise during peak, providing a natural alignment.
Growing: Faster repayment as you grow means access to more funding sooner.
Variable Revenue: Restaurants, retail, and events – where day-to-day sales vary significantly.
Cash Flow Mismatched: Businesses waiting for large customer payments can use daily card sales to drive collections, smoothing out cash flow gaps.
Understanding the Trade-off
Flexibility costs more: While a traditional loan might have a lower equivalent APR (Annual Percentage Rate) (e.g., 6–12%), a payment-linked advance is typically higher (equivalent to 25–60% APR, depending on repayment speed).
Feature | Traditional Loan | Payment-linked Advance |
Payment amount | Fixed (e.g., £1,000/month) | Variable (e.g., 15% of daily sales) |
Slow sales day | Still pay a fixed amount | Pay proportionally less |
High sales day | Still pay a fixed amount | Pay proportionally more |
Cash flow impact | Can create crises during slow periods | Automatically adjusts, preserves cash |
Cost | Lower | Higher |
When It's Worth the Cost:
You need capital quickly (24–48 hour decision vs. weeks/months for a bank).
Flexibility prevents cash crunches that would cost more (e.g., missed supplier payments or losing business opportunities).
You are aiming for a high-return-on-investment growth opportunity (e.g., inventory for peak season).
Frequently Asked Questions
Q: If I have zero sales for a whole month, do I pay nothing that month?
A: The daily variable collection will be zero. However, our agreements typically include a Minimum Monthly Payment (MMP) to ensure repayment progress. If you anticipate being unable to meet this MMP due to zero or extremely low sales, you must contact us immediately. We will work with you on options, as outlined in our cash flow management guidelines.
Q: What if my sales are declining – will I ever pay off the advance?
A: If sales decline permanently and significantly, repayment will take much longer. We encourage you to contact us early if you anticipate a long-term decline. Communication is key to working together through cash flow challenges and avoiding payment issues.
Q: Can I choose to pay more during good months to pay off faster?
A: Repayment is automatic based on sales percentage. However, you can make additional voluntary payments or request early settlement anytime. Contact [email protected].
Q: Does payment-linked repayment affect my credit score differently from a loan?
A: Payment-linked advances may be reported to business credit agencies. On-time "performance" means consistent sales and collections – not fixed monthly due dates. Arrears occur only with repeated failed Direct Debits or extended zero-sales periods without communication.
Q: What if my business model changes (e.g., shift from retail to wholesale with fewer card sales)?
A: Contact SAPI immediately at [email protected]. Significant business model changes affect our ability to collect. We may need to restructure your repayment terms.
Need Help?
Payment-linked repayment questions: [email protected]
Understanding your terms: +44 20 3868 4990
Cash flow concerns: [email protected]
Business Hours: Monday-Friday, 9am-5pm GMT