A Merchant Cash Advance is an alternative to Small Business Loans. Merchant Cash Advance offers flexible options to suit your business.
In case your type of business require initial capital investment you can utilize your own savings or borrow from friends of family members.
A smarter option would be using financial tools available on Canadian market: bank loans, small business loan or in case of short cash need using online lenders. For large amounts of investment cash you would be looking into government grants (which have certain requirements to be received), crowdfunding, venture capital or “angel investors” as well as business incubators.
If you need the business funding during its operation, or for growing its assets and cash flow, look into merchant cash advance, revenue based financing or checks factoring.
The term refers to the amount of money your business has available for daily or monthly operations, versus current business liabilities such as bills, salaries and stock management. The formula goes as Current Assets – Current Liabilities = Working Assets.
For example your business monthly revenue is $50000, your rent is $10000, salaries another $20000 and other operational spending is $8000. Your working capital would be $12000 – you can reinvest it into equipment, marketing or just use it as a profit.
You can find more information on working capital here.
Yes, it can, if this vehicle is used for business needs. There are plenty available options for its financing, starting from simple bank loan for commercial leasing, and going into other funding avenues such as asset based lending, equipment leasing loans. If you are into green energy you can also look into Canadian government incentives for eco-friendly vehicles.
Line of credit could be a great help in business funding, here are the steps business owner has to undertake for getting it:
Depends on your business growth stage and credit history you have multiple available sources for funding:
Accounts receivable factoring, or “factoring”, is a funding option, in which a business “pre-sells” its accounts receivable (unpaid invoices or post-dated cheques) to a third-party company (factor). This gives the business an opportunity to use its future funds earlier and receive cash in exchange for a percentage of the future payment
Revenue-based financing, or “RBF”, also known as “revenue-based loans” or “revenue-based capital”, is a business financing type in which a company receives capital from a lender in exchange for a percentage of its future revenue. This source of financing is popular among start-ups and small businesses that require initial capitals to build their assets in order to start generating consistent revenue.
In this model entrepreneur doesn’t have to pay interest or set monthly fee but to repay investor based on ongoing business revenue, or in other words, sharing its cash flow profits with RBF lender.
There are few typical steps an entrepreneur has to undertake to get a business loan:
In Canada, business credit scores typically range from 0 to 100. The higher business scores, the more opportunities its have with traditional money borrowing.
In general, a business credit score below 60 is often considered poor and high-risk for many financing options.
You can learn more about getting a funding with low credit score here.
In Canada there is no specific minimum credit score required for business to apply or obtain a loan. A-lenders or B-lenders have their own risk assessment levels which vary between type of lender and industry of borrower.
In Canada, business loans generally aren’t connected to a personal credit reports, with two exclusions:
Merchant cash advance (MCA) does not require a high credit score, at least not as a primary qualification factor. Merchant cash advance approval is primarily based on a business’s daily cash-flow or monthly revenue, rather than the personal credit score of the business or business owner.
Repayment Structure:
Loans have fixed repayment schedules. Borrower makes predetermined payments on regular basis of monthly, bi-weekly or other periods. MCA repayments having more flexibility – instead of fixed monthly payments, a percentage of the business’s daily credit card sales is deducted until the advance is paid off.
Cost of borrowing:
Loans have an annual interest rate (APR) that represents the cost. The borrower pays interest on the principal amount over the loan term. Instead of traditional interest rate MCA lender rather charges a factor rate. The factor rate represents the total amount borrowing cost, and it is typically higher than a traditional loan’s interest rate. The total repayment amount remains fixed, regardless of how quickly the advance is paid off.
Availability and Credit Check:
Traditional loans may require borrower to undergo a credit check to assess his or her creditworthiness. MCAs are usually unsecured, meaning they don’t require collateral. Instead, MCA providers focus on the business’s daily credit card sales and future revenue potential rather than the business owner’s credit history.
Regulations:
Loan are subject to strict financial regulations and lending laws in Canada, which may vary by province. MCA has less stringent regulations, this allow for borrower to obtain the funds faster.
A Merchant Cash Advance (MCA) is a financing option for businesses that need quick access to cash. Unlike traditional loans, MCAs involve a cash advance provided to a business in exchange for a percentage of its future credit card sales or daily revenue.
MCA is commonly used by businesses that have consistent daily credit card sales and can offer a percentage of it as per future repayment for quick cash. Some industries may greatly benefit from MCA, based on their daily operations:
Speak to one of our trained specialists to better understand what options we have for your business.
2M7 Financial Solutions is a provider of alternative funding & merchant cash advances for Canadian businesses. We have developed a proprietary system to evaluate risk and determine credit worthiness in a way that is not used by traditional funding sources such as banks.