Merchant Cash Advance vs. Cheques Factoring

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!

You have worked hard to start up your business. After perfecting your presentation, you have been able to raise some capital. Congratulations! Now what do you do? Make sure you don’t waste this opportunity to launch your business right. Here are five ways to prepare your business for capital raised.

1) Know your “runway”

Your business’s “runaway” is the amount of time your business has before it runs out of cash. First, you should look at your business’s monthly expenses and your capital raised and then, determine how much time you need in order to gain a steady stream of income. Ideally, you will want your business to have a six-month “runaway.” With six months’ worth of operating capital, you can deal with various disruptions that will come with operating a new business.

2) Use a budget management tool

One of the best ways to manage your business is to use a budget management tool, and with the right budget tool, you will be able to manage your expenses and identify opportunities to save money and run leaner. There are a number of top budget management tools that are designed around start-ups. Some of the top budget management tools include the following: Quicken - Quicken is great for smaller starter-ups with its easy-to-use software and interface. Centage - If you have more complex operations, then Centage is an ideal budget management software system. Lola - Lola is a great budget management tool if you are dealing with a number of expense report.

3) Secure the best prices from vendors

You want to make sure that your capital goes as far as it can possibly go. Therefore, you will want to control your costs. One of the best ways to control cost is to be able to get the best prices from your vendors. Be sure to get multiple quotes from as many vendors as possible. Also, if you are planning to use a vendor for the long term, try to negotiate better prices to help you stretch your capital.

4) Have a business plan

It’s a good idea to have a business plan. In fact, a business plan is like a road map that shows everyone in your company, as well as your investors, what is your plan to grow income and become profitable. If you have no experience writing up a business plan, don’t worry. There are a number of business plan templates that you can use to help you get started. Here are a couple of places where you can find business plan templates:

• LivePlan
• BusinessPlanTemplate
• Formprintr

5) Have an emergency or contingency plan

You want to make sure that your business has a plan for the unexpected. In fact, situations such as natural disasters or disruptions in manufacturing or inventory can spell disaster for your business. The best way to plan for an emergency is to set aside a portion of your capital raised and set it aside for emergency situations. That emergency money can save you in situations where you need money fast and you may not be able to raise further capital.

Getting your capital for your business going

Now that you have the capital that you need for your business, it is time to get going. Be sure to have a plan, set a budget, and watch your spending. Also, spend your business capital the right way and you will be well on your way to start-up success. If you require a merchant cash advance for your business, 2M7 Financial Solutions are here to help you out. Request a quote, we will be happy to assist you.

Cannabis has been legalized in Canada since 2019, and since the legalization, the consumption of marijuana has skyrocketed to the extent that setting up a cannabis business in the country is guaranteed to be a profitable investment. There’s never been a better time to move into the industry. However, if you’re a cannabis enthusiast that wants to make a move into this industry, the first thing you’re probably concerned about is the working capital to start the business. Business loans in Canada are a big part of the entrepreneurial world, however, getting funding for a cannabis business is easier said than done. So, how can you get funds for your future company? If this is a question that you’re asking, you’re at just the right place. Here are a few funding options from sources that will happily lend you money.

Bank Loan

Banks are obviously the first option whenever we think about anything money/loan-related. But cannabis, banks, and business loans in Canada are three things that don’t blend well together. Most mainstream banks will refuse to work with cannabis companies. However, if you can find the right bank, there’s potential to get your hands on a large stack of cash for your cannabis company at reasonable interest rates. There’s a lot of room for customizing payment plans as well, so you can pay back the money on your terms. You’ll have to find a relatively smaller bank that has lenient policies for where they invest their money. But even those banks are strict with their requirements for loans and will check to make sure you don’t have bad credit. The banks will not approve a loan if there’s any signs of problems in your credit and financial history.

Business Line of Credit

A business line of credit is another underrated option when it comes to getting funds for a cannabis business. It’s a simple process that provides your business with a revolving credit limit. It’s very similar to a credit card, but interest rates are significantly lower. You can withdraw a certain amount of money that you need and will have the option to pay it back in the form of monthly balances and partial payments. You’ll have the added benefit that the interest will only be charged for the outstanding balance of your card, making it a viable option for business loans in Canada. This is a good option for some quick funding when you need to pay the utility bills, fund inventory refilling, pay salaries, and more. However, you’re not going to get a large amount of money with a business line of credit. You’re going to be limited to a certain amount of money, depending on your credit limit. If you’re looking for funds to start your company, a business line of credit is not a good idea. If you need a small amount of money for occasional expenses, this is a great option.

Merchant Cash Advance

A merchant cash advance is, by far, the best way a cannabis business can secure funding. It’s a system where you pay today’s bills with tomorrow’s money. Your MCA provider will hand over a flat sum of cash directly into your account, and you’ll only have to return a certain percentage of your sales every month until the entire amount is covered. This is a flexible option for businesses that aren’t certain of what their sales volume will be each month. For example, if you have $0 in generated revenue for December, you won’t have to pay back anything to your MCA provider. That’s the major benefit of MCA and why it’s such a great idea for an industry like cannabis. Where Can You Get a Merchant Cash Advance? So, now that you know what an MCA is let’s talk about where you can get it. 2M7 Financial solutions is a Canadian merchant cash advance provider that has been helping small businesses like yours get over the funding limitations and compete with your top competitors. The best part about working with 2M7 is that we give funds to companies that banks and other lenders are saying no to. Here’s a breakdown of why 2M7 is the company that should fund your business:

• Quick Process – We work fast! If you signed up for an MCA in the morning, you could have the money in your account by the end of the day.
• Ignoring Bad Credit – Unlike banks, 2M7 doesn’t rely on credit scores as a factor to decide who gets funding and who doesn’t. If you have bad credit, you are still eligible for an MCA.
• Multi-Use Funding – Businesses have tons of miscellaneous costs, and we get that. That's why the money you get from 2M7 can be used for any business purpose you choose.

Conclusion

A merchant cash advance is the best way to secure capital for your company. So, if you are looking for a Canada-based provider to help you out, get in touch with the funding experts and discover how this alternative financing option can help your business.