Business Loan in Canada

Apr 2023

Jan 2025

There is a wide array of services available to businesses in Canada seeking to bolster their cash liquidity. This article will explore some of the most popular options, as well as their best use cases. These financial solutions typically include a combination of bank loans, CEBA loans, government business grants, factoring, cash advances, payday loans, and microloans.

Businesses can utilize these financial options to optimize growth, gain liquidity, bridge emergency situations, or capitalize on opportunities.

Let's delve into our options:

1. Traditional bank loans

This is the most conventional form of financing that small businesses can utilize to obtain Typically, these loans are secured by collateral, and may offer lower interest rates, making them an appealing choice for businesses with strong credit. However, small and medium-sized businesses adhering to conservatism and GAAP principles might have lower perceived financial strength, which can make obtaining traditional financing more challenging, especially if the bank relies on financial statements as part of its due diligence process. This can be particularly problematic for new startups and businesses without a significant financial track record. Furthermore, liquidity provided might be limited if a business is relatively new or experiencing volatility, even with collateral in place.

2. CEBA loans

The Canada Emergency Business Account (CEBA) loans are interest-free loans of up to $60,000 designed for small businesses impacted by the COVID-19 pandemic. These loans are 100% backed by the government and do not require any collateral. Businesses can use these loans to cover operating expenses such as payroll and rent, as well as for purchasing equipment or expanding their operations. The CEBA loans offer flexibility and accessibility with a few caveats. Firstly, the loan forgiveness repayment date has been extended to December 31, 2023, for CEBA loan holders in good standing. This means that loan holders may have to start repaying their CEBA loans as early as 2024. Secondly, eligibility is only applicable to businesses that have had an active business account with their financial institution as of March 1, 2020, and can demonstrate a decline in revenue due to the pandemic.

3. Factoring

Factoring enables businesses to sell their accounts receivable (invoices) to a third-party (a factoring company) at a discount. The factoring company then acts as the agent to collect payments from the invoice customer, providing the business with liquidity (cash) based on a certain percentage of the invoice amount. Factoring can significantly improve cash flow for small and medium-sized businesses by offering liquidity and quick access to funds. It is also helpful that the factoring company will be the one taking care of ensuring invoices are paid, freeing up valuable resources for small businesses.

4. Government business grants

The Canadian government provides an array of business grants designed to help small businesses flourish and These grantstypically target specific industries or business activities, such as clean technology, innovation, workforce development, and international trade, among others. A considerable number of grants currently emphasize research, development, and exporting. The application process for these grants can be intricate, requiring well-prepared grant proposals that effectively communicate the business's objectives, anticipated outcomes, and potential impact. This process is often competitive, as numerous businesses vie for the limited funding available. Newer businesses or those without prior grant writing experience may find this process daunting, and may benefit from seeking professional grant writing assistance or collaborating with experienced partners in their industry. Despite the challenges, securing a government grant can be a game-changer for small businesses, providing essential funding without the burden of repayment, and fostering growth, innovation, and competitiveness in the marketplace.

5. Payday loans or Microloans

Payday loans and microloans are small, short-term loans that are typically utilized to address unexpected expenses or navigate temporary cash flow gaps. While these loans may not be suitable for long-term financing needs due to their relatively higher interest rates and fees, they play a vital role in providing financial support during emergencies. By offering quick access to funds, payday loans and microloans help businesses remain afloat and operational during challenging times, allowing them to successfully weather temporary cash flow issues that are anticipated to improve in the near future. This targeted financial assistance can be a lifeline for businesses, enabling them to maintain stability and continue serving their customers as they work towards recovery and growth.

6. Cash Advance

A cash advance, particularly in the form of a Merchant Cash Advance (MCA), is an innovative financing solution that provides businesses with a lump sum of cash in exchange for a percentage of their future sales (typically credit card sales). Cash advances and MCAs can be exceptional financing options for businesses that need funds swiftly or require increased liquidity to seize opportunities that demand prompt. One of the key advantages of this financing option is its speed and flexibility. Cash advances can be processed more quickly than traditional loans, often within a matter of days, allowing businesses to address their financial needs without delay. Additionally, repayment terms are tailored to the business's sales volume, making it a more manageable solution for businesses with fluctuating revenues. MCAs are particularly valuable for new businesses and small enterprises that may face challenges in obtaining traditional bank loans due to a lack of financial history, inadequate financial book strength, or a dearth of collateral. By offering an alternative financing avenue, cash advances empower these businesses to overcome financial barriers and pursue their growth objectives. Ultimately, the various financing options available to Canadian businesses each have their own strengths and specific use cases. Traditional bank loans can be attractive for businesses with strong credit, while CEBA loans offer interest-free financing for those affected by the COVID-19 pandemic. Factoring provides immediate liquidity to businesses with outstanding invoices, and government grants can support targeted industries and activities. Payday loans or microloans can assist in managing short-term cash flow gaps. And cash advances offer rapid access to funds for businesses lacking financial history or collateral. The choice of financing option will depend on the unique needs and circumstances of each business. By understanding the advantages and limitations of each option, businesses can make informed decisions about the most suitable financing solution to support their growth, liquidity, and success.

October 6, 2020

January 24, 2025

What Is a Merchant Cash Advance?

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.

October 18, 2021

January 24, 2025

5 Ways to Boost Your Business Cash Flow

A business in its prime has sufficient cash flow to carry out all the operations of the firm. When sales and profits are high, companies can take their guard off by increasing the expenses. When records are left unchecked and minimal attention is given towards the cash, bankruptcy becomes the fate of the business. When companies are progressing exceedingly, they need to pay extra attention to their affairs and the cash flow. Sustaining cash is one of the most common challenges that firms face. Therefore, they must exhibit vigilance in the maintenance of cash flow to progress optimally. So, if you’re looking to boost your cash flow and, in turn, boost your business, here are five ways to do just that.

Lease

Real estate, automotive, and machinery can be more expensive on full payment leading to delirious prospects. Lease payments are an effective approach for business. They can spare a portion of the total income and designate it to the lease payments.

Avoiding Complete Purchases

In the case of complete payments, companies may end up compromising their other practices. If profit exceeds the usual amount, then companies can use it for other developmental strategies instead of paying the entire purchase. They can open up further avenues from the supplementary profits.

Improving Receivables

On certain occasions, payables can exceed the receivables. When the payables are due before receivables, then cash flow becomes affected. In such a scenario, the probability of bankruptcy is high. Companies should analyze accounts payable and receivables. They should garner the receivables before the payables to pay off the debts, carry out the purchases, and stock the inventory.

Early Notifications

Notify the customers and clients of their payments and plan a strategy to manage the payables. Send out the invoices early and conduct electronic payments to ensure safety and accessibility.

Merchant Cash Advance

Merchant Cash Advances are one of the most underrated and efficient ways of maintaining the cash flow. It doesn’t just enable companies to sustain cash but also enhance their prospects. The principle of MCA dictates that certain companies give out money to those business that require investments. Such companies can use it to raise capital and execute payables. They can utilize the cash flow to function productively. The companies have to pay a certain percentage each month they generate revenue. In case of lower cash flow, they can skip the payment and release them later when they gain sufficient cash flow. Moreover, MCA providers also hand out funding to businesses with low credit scores. So, if a bank is turning you down for a loan, you still quality for an MCA and will receive the funds regardless of your credit score.

Conclusion

Maintaining cash flow can be daunting but specific protocols and funding options like MCA ensure that companies retain handsome amounts of cash in their organization. If you run a business and require MCA, then 2M7 is here to help you out. We’re a financial organization that was designed to help small to medium-sized businesses scale in the market. Give us a call today at 1-844-932-0418, and we’ll have your MCA sent to your account within the week!

November 11, 2020

January 24, 2025

Why Businesses Should Choose Merchant Cash and Working Capital Loan

The business world has been turned upside down in the last few months, which has led to many questions for business owners. One of the most pressing has been about finances. In the current global climate, you may wonder what options you have to keep cash flowing. As it turns out, you have quite a few choices. The question is more about which options will work best for your business. There are quite a few reasons merchant cash advance and working capital loan could be the right fit.

What is Merchant Cash and Working Capital Loan?

‍Merchant cash and working capital loan refers to business financing options available to merchants on the basis of their future sales. It includes tools like merchant cash advances.A merchant cash advance, for example, is estimated on your future sales. The lender offers you cash to help you keep the business operating by estimating what your future sales are likely to be. Unlike a business loan, this option can be quite flexible as a result.

Why Choose Merchant Cash and Working Capital Loan?

‍Why are options like merchant cash advances so popular? One reason is that they provided the flexibility small businesses need.Since the advance is estimated on future sales, you pay the advance as you earn those sales. That means your payment can vary. If you have high sales, you can pay the advance down faster. If your sales are low, you won’t have to struggle to meet a high payment.The amount of the advance can also be variable. It’s also a great option for businesses that need ongoing cash injections. It also works for newer businesses or businesses that need smaller loan amounts.If any of this sounds like your business, then it could be time to discover what a merchant cash advance can do for you. Get in touch and find out if this option fits your business’s needs.