A merchant cash advance is the provision of a set amount of funds, determined by your existing credit/debit card payments.
The payments are simple, each day we collect a small % of your sales until the full amount is paid back. That way, we only get paid when you get paid. This makes a merchant cash advance a very cash flow friendly cash advance funding tool!
This % is the most important number in determining if these types of business cash advance loans are right for your business. The withholding % ranges from 4% – 30% of your daily sales, and would vary depending on a variety of factors, including the amount of the cash advance, daily credit/debit card sales, type of company, industry, etc.
NOTE: The withholding % should not be confused with an interest rate. It is the number of your daily sales that gets collected and put towards paying your loan. It has nothing to do with your cost of capital.
The way a factor rate is calculated is as a multiplier of the amount you receive. The Factor rate will typically fall between 1.18 – 1.48.
Your advance amount is multiplied by the given factor rate to determine the total amount that must be paid back. For example, if you’re given $25,000 at a factor rate of 1.30, you’ll need to pay back a total of $32,500 (25,000 X 1.30 = 32,500).
The factor rate is determined based on a large number of factors including industry, Location, Years in business, Number of employees, amount of funds being provided for credit card merchant loans Etc.
As a merchant lender & merchant cash advance company in Canada, We use our propriety software to create a credit score for your business (Unrelated to traditional credit scores) and thus determine the factor rate for your business as a cash advance lender. The longer we work with your business and the more we understand your business’s particular needs no matter, the more funding we will be able to give and the lower the factor rate will go and can offer some best business cash advance loans, no matter if its a start-up business or established.
Please keep in mind that a factor rate is different from an interest rate in that a factor rate doesn’t take time into consideration. Interest rates are calculated on an annualized basis. In the case of a factor rate instead of a fixed payment, the speed at which you pay back is based on your sales and performance of your business and therefore cannot be computed to an interest rate.
Getting approved for a business cash advance can take as little as a few hours, or up to two business days depending on how accurate and complete your application is. To get started with a merchant cash advance you will need to provide basic information about yourself and your business. This will include:
Also, you will need to have a business bank account where your cash advance will be deposited. If you wish to apply today or have any questions, feel free to fill out the short quote form here.
The application process for a merchant cash advance is quick and simple. Moreover, it does not affect your credit score. As a business owner, you have the freedom to choose how and where you want to apply funds received. Many 2M7 clients use their business cash advances towards operations such as:
Get liquidity to cover expenses
Buy, upgrade and repair business equipment
Buy stock and increase inventory
Redesign the facility
Expand to a new location
Hire employees to grow business
Invest in marketing and advertising campaigns
Consolidate and pay off existing debts
Expand the line-up of products and services
Buy or upgrade commercial vehicles
In order to qualify for a standard funding package, your business needs the minimum:
2M7 Financial Solutions is an all Canadian alternative funding & cash loan provider. We have developed a proprietary system to evaluate risk and determine credit worthiness very differently than a traditional funding source.