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When considering financing options for your small or medium-sized business, a merchant cash advance (MCA) may seem like the perfect alternative to a traditional business loan. While there are certainly many benefits to this type of lending choice, there are also some cons to keep in mind when determining whether an MCA is right for you. Learn more about pros and cons of a Merchant Cash Advance.

Benefits of Merchant Cash Advance

PRO (Benefit):  MCAs are available to those with poor credit

Business loans typically require a business owner and business to have good credit ratings. On the other hand, merchant cash advances consider your future sales projections, not your credit history. Since MCAs are repaid using future credit and debit revenue, a poor credit rating and collateral aren’t relevant to the lender.

PRO(Benefit): MCAs get you cash faster

The approval process for a merchant cash advance is much quicker than a business loan. In some cases, a business owner can have the money requested in their bank account in less than 48 hours.

Cons of Merchant Cash Advance

CON: Lenders are unregulated

The MCA industry is largely unregulated, which makes it possible for some lenders to charge hefty interest fees and take advantage of their customers. Be careful, read reviews, and ask questions of your lender before you decide on a merchant cash advance.

CON: Daily deductions can hurt cash flow

Repayment of a merchant cash advance occurs by deducting funds from credit card receipts, sometimes on a daily basis. Make sure to check with your MCA provider the repayment details of the plan you are signing up for.Merchant cash advances are an alternative lending method for small business owners who need cash fast and may not have the collateral or credit to get bank loan approval. However, before you apply for an MCA, make sure you do your homework, ask questions, think about pros and cons of a Merchant Cash Advance and if you need advice on alternative lending solutions, we are always here to help.

The business landscape is always evolving. In the last few weeks, the situation for many businesses in Ontario has changed drastically. You may be wondering where you can turn to find support in these challenging times.The good news is that there are plenty of supports for business owners operating in Ontario. If you’re looking for answers, try some of these tips and resources.

Federal and Provincial Support for Business Owners

Both the federal and provincial governments have announced funds designed to help business owners keep their doors open and their lights on during this time. If you’ve faced slashed hours or needed to lay employees off, then you may be eligible for business support funds.These funds could help you pay your employees during this time. Other funds are available to help businesses n Ontario manage their day-to-day operating expenses.

Check Government Websites for Resources

You may also want to look at the provincial government’s website, which has lists of programs and services for business owners like you. You can find one-on-one small business consulting and guidance, as well as workshops and more. You may also qualify for consultations with lawyers or accountants. Support is also available if you need grants, permits, or licenses. There are even resources to support mentorship and networking, available through Small Business Enterprise Centres.

Connect with Your Peers

Networking resources may be available through government-run resources. You may also find support through local small business organizations or trade federations. Even social media can help as you connect with your colleagues and peers.

Great Options for Creating Liquidity

In an uncertain market, business owners like you need financial options to help you create liquidity. Check in with your financial institution about measures they can provide to help you. You may also explore other options, like a merchant cash advance. The right funding options will help you create stability and flexibility when your business needs it most. Curious to learn more about your financing options? Get in touch with the experts and discover what a merchant cash advance could do for your business.

Many businesses today are facing a cash crunch. In this environment, it’s important to understand the options you have as a business owner. There may be more avenues available than you think.One of those could be a merchant cash advance. What is a merchant cash advance, and how does it work? This guide answers these questions and more.

What Is a Merchant Cash Advance?

A merchant cash advance, or MCA, is a financing option available to many retailers, restauranteurs, and other business people. With this option, you receive cash in advance of actually earning it. The lender assesses you against your anticipated future credit card sales. They’ll then offer you a percentage of those sales as cash.You pay the advance back as you make those credit card sales. The lender takes a set percentage of each sale and puts it towards paying back the advance.

How Are MCAs Different from Business Loans?

A merchant cash advance is different from a business loan in a few ways. First, a business loan is assessed against your history. To decide if you’re eligible for a loan, the lender will look at your credit score. That includes information about payment history, how you’ve handled other debts, and more. They’ll also look at your business’s past income.They’re less interested in information about projected futures. You may show a potential lender your projections for the rest of the year, but they prefer more concrete evidence.The MCA is leveraged against your future sales. Instead of looking at your credit history and past earnings, the lender is interested in predicting future sales.That’s why this option is known as an advance, not a loan. The lender is advancing anticipated funds to you. They believe you’ll earn those funds in the future, so all that changes is when you get the money.Another difference between a business loan and a merchant cash advance is the repayment terms. A business loan is usually an installment loan. That means you’ll make a set payment at regular intervals. Those can be monthly, weekly, or even biweekly.With a merchant cash advance, the lender takes a percentage of daily credit card sales and applies that to your repayment. If your sales are down one day, you don’t need to worry about “making up” the difference or ensuring you’re meeting a minimum payment amount. Similarly, if your sales are high on another day, you’ll be able to repay more of your advance.There are also differences in how the lender earns on the money they’ve given you. A business loan will have an interest rate. Merchant cash advances usually come with holdback rates and repayment rates. Repayment rates are sometimes called factors.The holdback rate is the daily percentage you pay to the lender on your sales. The repayment or factor rate is the amount typically charged. You may, for example, pay a factor rate of 1.20 or 1.40, which means you’ll pay the lender another 20 to 40 percent of the original advance.

Benefits of Merchant Cash Advances for Business Owners

Now that you understand how the MCA works, you’re probably wondering if there are any benefits to using one. There are quite a few, actually.First, merchant cash advances are often more accessible than business loans. This is especially true for startups or small businesses without lengthy operational histories. You may not be able to prove to a loan lender that you can repay a loan. If you have steady credit card sales or other revenue moving through your business account, then you should be able to qualify for an MCA.Another benefit is the speed with which funds can be delivered. Loan applications could take time to process. That’s because the lender wants to check in on your history and make credit inquiries. By contrast, a merchant cash advance lender is more interested in your future. They want to see you have funds moving through your account regularly, and they can use those numbers to anticipate future sales.This process takes much less time, which leads to faster approvals and deposits. If you need cash in a hurry, an MCA is a much faster option than a business loan.Flexibility is another major benefit of MCAs. Since the lender recoups a percentage from sales, the repayment goes up and down with your sales volume. You don’t need to worry if your sales fall, and you can repay the advance faster if your sales are high.

Drawbacks of MCAs

Like everything, merchant cash advances do have a couple of downsides. One is that MCAs don’t help you build credit.  That’s because they’re not loans. If you’re looking to build a better credit history for your business, you may want to investigate other options.Also, you have to consider that the annualized interest rate can be much higher than a business loan. MCAs could end up costing your business more than a loan might, especially over the long term.

How to Apply for a Merchant Cash Advance

MCAs are good options for business owners who need cash quickly and will pay it back relatively fast. They’re also an option for businesses that don’t have long operational histories or may not otherwise be approved for a loan.If that sounds like you, you might wonder how you can go about getting a merchant cash advance.

• Your first step should be to research providers in your area. Compare offers. Be sure you understand the holdback rate and factor rates for each offer.
• Fill out the application form provided by a lender. These are typically one to two pages. You’ll have to provide basic details about your business, such as your business tax ID.
• You’ll also need to provide documentation. This is usually a combination of bank statements and payment processing data. The lender will likely ask for several months’ worth of information, so they can accurately assess trends and the amount you qualify for.
• Once you’re approved, you can set up processing as required. Finalize the details on the advance, and make sure you understand the terms. Repayment sometimes starts as early as the next day.

Fund A Better Tomorrow for Your Business

If you’re worried about financing, you have plenty of options out there, and the merchant cash advance is just one of many.If you think a merchant cash advance might be right for you, get in touch with our experts. With their help, you can get access to the funds you need when you need them.