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.

April 4, 2022

January 27, 2025

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!

January 18, 2021

January 24, 2025

How Do I Get a Cash Advance

You’ve done your research, and you’re convinced a merchant cash advance is a great opportunity for your business. You can get a flexible funding solution to help you cover essential business costs or even expansion. Better yet, you can quickly access the funds you need with flexible repayment terms. So, how do you get an MCA? Follow these steps and you’ll have the funding you need in no time.

Research Providers

Doing research should be your first step. There are plenty of lenders offering MCAs, but not all of them are created equal. Many of them do business online. This makes it easy to find information about where they operate and the kinds of businesses they support. Some specialize in working with small businesses, while others prefer working with large businesses. Some may have expertise in your industry. Always look for a provider who is upfront about their MCA program. Check customer reviews and testimonials. What do other business owners say about this lender?

Submit an Application

Once you’ve decided on a provider, it’s time to prepare your MCA application. Always review the lender’s specific requirements. The more complete and accurate your application, the faster the lender can approve you. You’ll need to provide:

Government-issued ID, to prove your identity
Your merchant ID number
Recent bank statements
A void cheque

Your merchant ID number allows the lender to check on your merchant account, giving them accurate information on your monthly sales. Your recent bank statements can also provide this information, as well as crucial information about cash flows. You’ll also need to provide a bank account number for your business. The business bank account is where your merchant cash advance will be deposited.

The Approval Process

The lender will approve your application within two business days. If your application is complete and accurate, the funds may arrive on within the same day. Always check what the lender will provide. Some lenders will offer up to 125 percent of your monthly sales. Next, they’ll send you an agreement. Read this over carefully, since it contains information about your repayment schedule, fees, and more. Some lenders post their general terms, including rates and fees, online. You can review them before you apply. If you’re unsure about the lender’s offer, don’t be afraid to contact them. For example, if you were hoping for more funds than they offered, you can discuss their rationale with them. Once you’re satisfied with the lender’s terms, your funds will be transferred to your bank account.

How Repayment Works

Your merchant cash advance provider should get in touch with your payments processor. They’ll set up direct deductions, which means repayment of your advance happens automatically. You can keep track of payments through your account with the provider. This makes the process perfectly transparent, and you’ll always know where you stand.

Get the Funds You Need Now

Ready to get a merchant cash advance for your business? You can get in touch with the experts for a free quote or apply now. The funds you need could be just a few clicks away.

February 1, 2021

January 24, 2025

Types of Alternative Financing for Small Businesses

Extra financing a common problem for small businesses. Maybe you need to hire an employee or you require additional equipment to manage incoming orders. Whatever the case, you need capital to keep the business not just running but growing too. There is the traditional bank loan, but you’re not sure you’ll qualify. Maybe your application was rejected. Now you’re wondering what alternatives you have. If you’re looking for alternative financing options for small business, then check out these choices. One of them may be the right fit for your business.

Check Out a Merchant Cash Advance

The first alternative financing option to consider is a merchant cash advance, or MCA. This is different from a loan, because the lender looks at your future sales. They examine your past credit card sales to determine trends in the business. They use that information to estimate your likely future sales. Then they make you an offer for a cash advance. The MCA offers more flexibility than a traditional business loan, which makes it more attractive to small businesses. Your payments can fluctuate with your actual sales. If you do more credit card sales in a month, you’ll pay your advance back faster. If you have a bad month, your payment will be smaller, which can take the pressure off your business.

Think about a Line of Credit or Credit Card

A line of credit or business credit card are flexible options. These financing solutions are known as revolving credit. That means you can use them, in full or in part, to fund pretty much whatever your business needs at the moment. You can then pay them back as possible. As you pay down the line of credit or credit card, the funds become available for you to use again. This could be a great solution for a business with ongoing credit needs or one with some small cash flow issues.

Consider a Microloan

If you only need a small amount of money, you may be turned down for a business loan through the bank. That’s because institutional lenders tend to make big loans. They’re more lucrative for the lender. One option you have is a microloan. Microloans are typically offered by online lenders or other businesses, not big institutions, so do your research and choose a lender that works for you.

Look at Peer-to-Peer Lending

Yet another option you have is peer-to-peer lending. This could be a loan from a colleague or it might be run through a P2P lending platform. In the business world, there might be business-to-business, or B2B, lenders as well. These lenders can typically make you a better offer than an institution, and they may be more willing to finance smaller loan needs. You can usually find them online.

You Have Plenty of Options

As you can see, there are plenty of financing options available for small business. If you’ve been turned down for that bank loan, don’t fret. You can still find the funding you need. Is a merchant cash advance the right solution for you? Get in touch with the experts, and get the funds you need today.