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Merchant Cash Advance vs. Cheques Factoring

Merchant Cash Advance vs. Cheques Factoring

4
Apr 2022
27
Jan 2025

Managing a small business is challenging. One of the common challenges for business owners is financing. Your company might not have a lengthy credit history or collateral to apply for a bank loan. Whether you want to grow your business or cover unforeseen expenses, you have come across other financing options. Merchant cash advance and cheques factoring are some of the available options for small businesses.

What Is Merchant Cash Advance?

A merchant cash advance is an alternative financing option for small businesses. You can take the funds upfront and pay them off with a percentage of future sales. The MCA is an ideal solution for businesses that need fast funding and might not be eligible to take a bank loan. The availability of funds is another excellent advantage. If your business needs the funds fast to proceed with the operations, the cash advance will be approved within a day or two.

PROS

Fast access to funds

When timing is crucial and you can't go through the lengthy bank approval process, the MCA is your solution. Small businesses can get funds within a day or two from submission. Unlike the traditional bank process, the financial institutions that issue MCAs don't do rigorous checks. They will check the business's past sales to determine whether they qualify for a cash advance.

Ideal for businesses that work with cash and credit cards

Retail and restaurant businesses rely on a high volume of credit card sales, making them ideal for obtaining MCA. If your business depends on cash or credit cards, a cash advance is the ideal financing method. This opportunity is perfect for the ones that don't rely on invoices. Instead, they take a percentage of the credit card sales to repay the loan.

CONS

High-interest rates

Merchant cash advance comes with higher interest rates than traditional bank loans. The convenience of having the funds fast will cost more. However, the price is worth paying when you need urgent funds to proceed with the business operations.

What Is Cheques Factoring?

A post-dated cheque is a cheque that can be cashed on the indicated date on the document's face. It is a form of advance payment and can be cashed on a specific date. According to Canadian laws, a cheque can't be cleared before this date. If you still need cash to keep your business's liquidity, you can sell the cheque to a factoring company.

PROS

Fast approval

Depending on the date indicated on the check face, you might have to wait long to receive the payment. If you need to meet your business needs urgently, factoring your cheques will provide you with funds quickly. They will pay off a particular value of the face value while keeping a specific percentage as a fee.

No credit score checks

When applying for a traditional bank loan, they will do a rigorous check on your financial history. When your small business is relatively new and doesn't have a credit history, you might be restricted from obtaining such loans. Your ability for cheque factoring isn't assessed with credit history, and you aren't required to disclose collateral. This is very important, as you don't need to put your property or equipment at risk. The factoring company will check the check for authenticity.

Not deal with cheques

Having to deal with cheques is a tedious job. Passing this responsibility to a third party means less time spent sorting out cheques so that you can focus on the more important aspects of your business.

CONS

Higher cost

The factoring company will charge fees to provide you with the cash in advance. They will usually pay 80% of the amount indicated on the face. However, the high cost might pay off if you need money urgently.  

Requirements

Cheques factoring companies might have specific requirements for cashing out your document. For example, the check drawer should be a reputable entity. Also, the factoring company might have particular requirements on the cheque's active time.

Merchant Cash Advance vs. Cheques Factoring

For cheques factoring, you will pay a fee to the factoring company expressed as a percentage of the total amount. On the other hand, you will pay off your MCA as a percentage of your future sales. When choosing the suitable financing method for your company, select the one that is a better fit for your needs. We at 2M7 are dedicated to providing the needed funds to enhance your business's liquidity without restrictions on how to use them. Get in touch with us, and we will answer your specific needs!

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What’s the Difference between MCA and Business Loan?

If you’re a small business owner, you know it can be difficult to maintain cash flow. While there are different financing options on the market, many people might consider a merchant cash advance (MCA) and a business loan to be the same thing. While these are both legitimate options to consider, there are key differences you should know before choosing between a merchant cash advance and a business loan.

Bank Loans are the More Traditional Option

A bank loan is the more traditional financing option and what many people consider when they are starting a business or require additional capital, for example. Once approved for the loan, the bank provides a lump sum of cash in exchange for monthly payments over a set period of time with either a fixed or variable interest rate.

Merchant Cash Advances Have Crucial Differences

The merchant cash advance industry is one of the pioneers in alternative lending options - these are not your traditional business loans.An MCA provides your business with a lump-sum payment, like a loan, but the repayment plan is not structured in monthly installments. Instead, the MCA is repaid using a percentage of future credit and debit card sales drawn directly from your future revenue.MCAs, therefore, do not qualify as a loan and don’t require personal guarantees or a stellar credit score.If your small business needs an influx of capital, consider a merchant cash advance before you visit your bank. If you have questions about the differences between lending options, we are always here to help.

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5 Ways to Build Engaging Relationships with Your Clients

It shouldn’t come as a surprise that you need to build trust with your clients to drive sales. People buy from companies they trust, and you have to earn that trust. For most companies, that means building engaging relationships with clients over time. The more you interact with the client, the more opportunities you have to convince them to trust you.Building relationships is easier said than done. These five methods could help you engage with your clients on a deeper level.

Ask Questions and Get Answers

When was the last time you took a customer survey? Companies shouldn’t shy away from getting feedback from their clients. Ask the people you work with what you do well and where you can improve. It’s important to put that feedback into action. When your clients see you’re listening, they’ll feel their input really matters.

Go Above and Beyond

When you receive exceptional service, it stands out in your mind. You should aim to exceed your clients’ expectations at every turn. By doing so, you show how important the client is to you.

Communicate and Connect to Build Engaging Relationships

Have you ever watched a video or read an article, and thought, “This client needs to see this”? You should attend to clients’ needs this way. It’s part of communicating and connecting with people on a human level. By sharing content or sending an email to check-in, you can more easily build engaging relationships with your clients.

Show Appreciation

Everyone likes to feel important, and your clients are important to you. Show your appreciation by providing a loyalty program or a special offer.

Remember Patience is a Virtue

Today’s customers don’t like being pitched to, so cultivate patience instead. A client may not be ready to buy today. They may need more information. That’s okay. You can support them by answering questions and sharing information. By being helpful, not pushy, you’ll build trust and relationships with your clients.

Finance Your Relationship-Building Program

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5 Most Common Reasons Businesses Look for Funding

Funding is the only way to turn startups into successful businesses. Getting funding is easier said than done. However, it’s a fact that you need sufficient money to get your business to the next level. Investment and funding are required to raise the necessary capital to either initiate or run a business. The working capital is the option on which companies rely for the smooth running of affairs and uncalled crisis. Funding coupled with motivation, determination, and brilliant ideas can kick start the business off the ground. Lack of proper and timely funding can collapse business strategies and decrease capital, which ultimately causes failure. If you’re wondering why businesses consider looking for funding, you’re at the right place. Following are some reasons due to which funding becomes essential for companies.

Development

Growth and development are the foremost motives of a business before seeking funding. Acquiring new clients, local businesses, and marketing to improve outreach are all the prospects of growth. Establishing additional branches and expanding services is also the result of the funding sought for the sake of growth.

Working Capital

Another significant reason for obtaining fundings is working capital. Working capital is the monetary assets that provide the companies with sustainability. Managing regular affairs and retaining the quality of services are done through the working capital. It can be used to stock the inventory and carry out successful purchases by efficient expenditure. Insufficient working capital can cause detrimental effects to the business in the longer run. The current affairs and prospects depend on the working capital, which is provided through funding.

Acquiring Assets

To hold a firm position in the market and among the competitors, businesses need to purchase assets. Eliminating the competitors in the market is the feature of having more assets. Businesses can emerge out as a winner when they become the sole provider of a service. Companies can either buy shares or completely acquire other businesses. Assets not only strengthen the company but also enhance its market value.

Initiating New Ventures

Companies use funding to plant new ventures. These endeavours can promote the business and increase its progress. To conduct these strategic ventures companies, need ambition and funding. They can articulate ambition in their employees, but for funding, they need help.

Boosting Startups

Funding is vital to support startups in the fierce market. Startups usually have scant resources that can soon become insufficient, leading to a business catastrophe. Startups need financial help and investments to accomplish their goals and thrive among the competitors.

Getting an MCA

Companies can find investors that either work independently or with an organization to gain the required funding. They can also opt for loans from banks. However, the much better alternative is a merchant cash advance that focuses on the growth of a business. Companies prefer MCA as the conditions of the loan are appropriate to their predicament. The best part about getting an MCA is that paying it back is extremely convenient. You’ll only be paying back a specific percentage of your monthly earning. And, if there’s a month where you don’t generate revenue due to whatever reason, you won’t need to pay the finance company back anything. Receiving timely fundings can save companies from derailments. If you’re looking for a financial organization that can get you the resources you need to boost your business, 2M7 is just the company you should work with. We’ve helped hundreds of companies like yours in the past with our incredible 97% approval rating. We offer merchant cash advances to businesses in all industries and of all sizes. Gain an edge over your competition and contact us today.

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