3 Signs You Should Consider a Merchant Cash Advance

· By Avi Bernstein, CEO, 2M7 Financial Solutions

Merchant cash advances aren't priced like bank financing, so their cost can be hard to compare. There's no annual interest rate. Instead, the funder applies a factor rate to the amount you receive to calculate the total repayment, and that total is set before you sign. The cost of capital is the total repayment minus the advance.

2M7 Financial Solutions is a Canadian direct funder of merchant cash advances. At 2M7, the cost of an advance is a fixed dollar amount agreed before you sign. Multiplying the advance by the factor rate gives the agreed total repayment, before any eligible early payoff discount. Factor rates at 2M7 typically fall between 1.18 and 1.48, so a $50,000 advance has an agreed total repayment between $59,000 and $74,000 and a cost of capital between $9,000 and $24,000.

The agreed cost does not grow while the advance is outstanding, and no interest accrues. The factor rate you're offered depends on the funding amount, how long the business has operated, its monthly revenue and its industry.

The repayment option you choose affects your daily cash flow, and an eligible early payoff can reduce the total cost. Both are covered below, with worked examples for a restaurant, a construction company and a retailer. All dollar amounts are in Canadian dollars.

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How do you calculate merchant cash advance costs?

Start with the amount you receive, the total you will repay and the payment coming out of your account. A factor rate is the multiplier used to calculate total repayment. Subtract the advance from that total to get the cost of capital.

Agreed total repayment = Advance × Factor rate

Cost of capital = Agreed total repayment − Advance

With fixed payments, the same amount is paid automatically each business day, and you can call 2M7 to ask about reducing it if revenue drops. Your offer states the payment amount.

With flex payments, the payment is a share of the revenue deposited into your business account each day.

Flex daily payment = Daily revenue × Holdback percentage

The holdback percentage at 2M7 typically ranges from 4% to 30%, depending on the funding amount, revenue and industry. The percentage stays the same and the dollar amount moves with your daily revenue.

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What a $50,000 advance costs

On a $50,000 advance, a factor rate of 1.18 means $9,000 in cost of capital. At 1.48, that cost is $24,000.

Agreed totals are before any eligible early payoff discount. Your offer shows the exact factor rate and agreed total repayment in dollars before you accept it.

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Three worked examples

Illustrative examples, not offers. Factor rates and holdback percentages are within 2M7's published ranges, and agreed totals are before any eligible early payoff discount.

Restaurant. The owner replaces a range and a walk-in cooler. On a day with $3,000 in revenue, $300 goes to repayment. If a slow week drops revenue to $2,000 a day, the payment drops to $200 and repayment takes longer. Changes in sales do not change the agreed $65,000 total. An eligible early payoff can reduce it.

Construction company. A contractor has to buy materials weeks before the client's first progress payment. Revenue arrives in large, irregular deposits rather than steady daily income. This illustration uses fixed payments: the contractor pays the same amount automatically each business day and can call 2M7 to ask about reducing it if a client payment arrives late.

Retailer. A store stocks up in October for the holiday season. In December, daily revenue climbs to $5,000 and the payment rises to $400, so the advance is repaid faster during the busiest weeks. In a quiet January, the payment falls with revenue.

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Fixed or flex payments: the same advance two ways

Here is the restaurant's $50,000 advance at 1.30 under each option. For this illustration, both options use the same factor rate and the same agreed total repayment of $65,000, before any eligible early payoff discount.

With fixed payments, the daily amount is the same each business day, which some owners find easier to plan around. With flex payments, the dollar payment decreases when daily revenue falls and increases when it rises.

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Does paying early save money?

At 2M7, an eligible early payoff receives a 10% discount on the remaining balance when the account is in good standing and the payment comes directly from your business, not from another funder. Not every funder offers an early payoff discount, so when you compare offers, ask whether paying early changes the amount owed.

Take the restaurant again. It has repaid $40,000 of its $65,000 agreed total, leaving $25,000. An eligible early payoff earns $2,500 off, so the owner pays $22,500 instead. The advance's total cost drops from $15,000 to $12,500.

Ask your funding specialist for the payoff amount and the saving at your current balance.

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Factor rate vs APR

A factor rate is not an interest rate. It tells you the total repayment relative to the advance. It does not, by itself, tell you the annualized cost, which also depends on the timing and amounts of payments.

The same factor rate can represent different annualized costs depending on how quickly the advance is repaid, even when the dollar cost stays the same. With flex payments, repayment speed follows your sales.

When you compare offers, compare the agreed total repayment, the effect on daily cash flow and any savings available for an eligible early payoff. Ask for those figures in writing before you accept an offer.

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Does 2M7 charge fees beyond the factor rate?

Beyond the cost of capital, 2M7 charges no application, origination, underwriting, documentation, brokerage, servicing, maintenance, renewal or early repayment fees, and no collateral is required. 2M7 does charge a fee when a scheduled payment is returned.

Not every funder prices this way. When you compare offers, check the amount you will actually receive, the agreed total repayment and any separately stated charges.

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Frequently asked questions

What is a factor rate?

A factor rate is the multiplier used to calculate the total repayment of a merchant cash advance. Subtract the advance from that total to get the cost of capital. At 2M7, factor rates typically range from 1.18 to 1.48.

What is a holdback percentage?

With flex payments, the holdback is the share of the revenue deposited into your business account each day that goes toward repayment. At 2M7 it typically ranges from 4% to 30%. A 10% holdback on $3,000 in daily revenue is a $300 payment.

How much will I pay back on a $50,000 merchant cash advance?

At 2M7's typical factor rates, the agreed total repayment is between $59,000 and $74,000, before any eligible early payoff discount. Your offer states the exact total before you accept it.

Does a merchant cash advance cost more than a bank loan?

Usually, yes, for a business that qualifies for a bank loan. A merchant cash advance trades a higher cost for speed, repayment that can follow your sales, and an approval that weighs revenue alongside credit. Bank financing often takes longer and asks for more documentation. At 2M7, the cost is a fixed dollar amount agreed before you sign, no interest is charged and no collateral is required.

What are 2M7's minimum eligibility requirements?

2M7's minimum eligibility requirements are a Canadian business operating for at least 3 months, at least $15,000 a month in revenue and no open bankruptcies. Credit score is considered alongside revenue, so a low score does not automatically rule a business out. Meeting the minimums does not guarantee approval.

How quickly does the money arrive?

Approval decisions typically come within 1 business day, and funds are typically deposited within 24 hours of approval.

See what your advance would cost

Ask a 2M7 funding specialist for your factor rate, agreed total repayment, daily payment or holdback percentage, and early payoff conditions in writing before you accept an offer.

Check If I Qualify

Ontario, Alberta, Saskatchewan and Manitoba all require an owner to pay a contractor's proper invoice within 28 days, or to dispute it in writing within 14 days. Once paid, a contractor has 7 days to pay its subcontractors. The provinces differ on holdback, lien deadlines and which projects are covered: Manitoba's holdback is 7.5% while the others hold back 10%, and Saskatchewan's lien period is still 40 days while the others allow 60.

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These rules are known as prompt payment legislation. They set a clock on construction payments that starts when a contractor delivers a proper invoice, and they give unpaid parties a fast dispute process called adjudication. Each province built its own version, so a contractor working across provincial lines faces different deadlines on each job.

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This guide compares the rules in each province, explains what they mean for a contractor's cash flow, and sets out what to do when a payment is late. It is general information, not legal advice. Check your contract and the current statute, or speak with a construction lawyer, before acting on a specific dispute.

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Prompt payment rules by province at a glance

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Ontario, Saskatchewan and Manitoba apply prompt payment to contracts entered into on or after the in-force date. Alberta also required contracts already in place to comply by August 29, 2024. Alberta's column covers private projects. Contracts with the Government of Alberta follow separate rules, explained below.

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Prompt payment in other jurisdictions

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What these rules mean for a contractor's cash flow

Prompt payment shortens the wait for most of a contractor's money, but it does not remove the wait. Three gaps remain even when every party follows the rules.

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The billing cycle. Proper invoices are usually issued monthly, and Alberta requires one at least every 31 days. Work done early in a billing period is not invoiced until the period ends, and the owner then has 28 days to pay. Materials bought on day one can go unpaid for close to two months.

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The holdback. On a $200,000 contract in Ontario, Alberta or Saskatchewan, the owner retains $20,000. In Manitoba the holdback on the same contract is $15,000. On most projects that money is released only after the lien period expires near completion. Ontario now requires annual release on all contracts, and Alberta requires annual or phased release on contracts over $10 million that run longer than a year.

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Payment down the chain. A subcontractor's 7-day clock starts when the contractor is paid. If the owner pays on day 28, the subcontractor may wait 35 days from the contractor's invoice. In Ontario, Saskatchewan and Manitoba, if the owner does not pay at all, the contractor must still pay its subcontractors by day 35 after it invoiced the owner, unless it gives them a notice of non-payment.

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Meanwhile payroll, equipment rentals and supplier accounts run on their own schedules, often weekly or within 30 days. A busy contractor can be profitable on every job and still be short of cash between invoices. Planning for that gap is part of bidding a job, not an afterthought.

Province-by-province details

Ontario

Ontario's Construction Act introduced prompt payment on October 1, 2019, for public, private and alternative financing and procurement contracts. Amendments in force since January 1, 2026, make an invoice proper unless the owner gives written notice of a deficiency within 7 days.

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The 2026 amendments also require holdback to be released every year. Within 14 days after each contract anniversary, the owner must publish a notice of annual holdback release, then pay the accrued holdback between 60 and 74 days after publication, provided no lien remains undischarged. For contracts entered into before January 1, 2026, annual release begins on the second anniversary after that date. Disputes go to adjudication through the Ontario Dispute Adjudication for Construction Contracts (ODACC), and parties can now also retain private adjudicators qualified by ODACC.

Alberta

Alberta's Prompt Payment and Construction Lien Act has applied to private projects since August 29, 2022. Alberta allows 90 days to register a lien for the supply of ready-mix concrete and for oil or gas well work, longer than the general 60. Late payments carry interest at the contract rate, or the rate in the Judgment Interest Regulation if the contract sets none.

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Contracts with the Government of Alberta entered into on or after April 1, 2025, follow a separate prompt payment process under the Public Works Act. The Crown must pay an undisputed proper invoice within 28 days. Contractors must pay subcontractors within 35 days of receiving the subcontractor's proper invoice, and subcontractors pay their own subcontractors within 42 days. Payment disputes can go to adjudication up to the Court of Justice's monetary limit, currently $200,000. Capital asset upkeep contracts and special scope contracts, where the contractor provides financing, are excluded.

Saskatchewan

Saskatchewan added prompt payment to The Builders' Lien Act on March 1, 2022, for contracts entered into on or after that date. The Act binds the Crown, with exclusions such as highway work, and mining and certain power contracts are exempt. Saskatchewan's lien period is 40 clear days after the triggering event, such as completion or abandonment, which makes it the shortest of the four provinces. Adjudication runs through the Saskatchewan Construction Dispute Resolution Office (SCDRO).

Manitoba

Manitoba's prompt payment rules took effect April 1, 2025, and apply only to contracts entered into on or after that date. The same amendments raised the lien period from 40 to 60 days. Manitoba's holdback is 7.5%, retained for at least 60 days after substantial performance or completion. The Act binds the Crown but excludes Manitoba Hydro contracts for generating stations and related plant, and work under contracts governed by The Infrastructure Contracts Disbursement Act, which include certain provincial highway contracts. Architects' and engineers' fees are also exempt from prompt payment.

What to do when a payment is late

The prompt payment process gives a contractor several remedies short of court. Work through them in parallel, because the lien deadline keeps running while you pursue the others.

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1. Confirm your invoice was proper. The 28-day clock only starts on a proper invoice, which must include the details the statute lists, such as the invoice date, the work period, the amount and payment terms. In Ontario, an owner who finds a deficiency must now say so within 7 days.
2. Check for a notice of non-payment. If the owner disputes the invoice, it must give written notice within 14 days stating the amount withheld and why. Any undisputed amount is still due within 28 days.
3. Track interest. Unpaid amounts accrue interest in all four provinces. Saskatchewan and Manitoba use the prejudgment rate, or the contract rate if higher. Alberta uses the contract rate, or the Judgment Interest Regulation rate if the contract sets none.
4. Start adjudication. For a disputed amount, a contractor can refer the dispute to the province's adjudication body. Adjudication is designed to resolve payment disputes faster than court, and the decision must be followed unless a court or arbitrator later decides otherwise.
5. Protect your lien rights. Register a lien within the provincial period (60 days in Ontario, Alberta and Manitoba; 40 clear days in Saskatchewan) or lose the right. Ontario extends the lien period in some cases where adjudication has started, but get legal advice before relying on an extension.

Covering costs while you wait to be paid

Prompt payment sets a deadline, but contractors still carry materials, payroll and holdback for weeks on every project. Before bidding, map when each invoice will be paid and when each major cost falls due. Negotiate deposits or mobilization payments where you can, and invoice on the first day the contract allows.

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When the gap is still too wide, working capital can bridge it. A merchant cash advance from 2M7 Financial Solutions provides funding based on a business's revenue, with no collateral required, and repayment can be set as a percentage of sales. 

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See how contractors use it on the construction funding page or see what options fit your project schedule.

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Frequently asked questions

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How long does an owner have to pay a contractor in Ontario?

An Ontario owner must pay a contractor's proper invoice within 28 days of receiving it, unless it gives a notice of non-payment within 14 days. Undisputed amounts are still due within 28 days.

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Does Alberta have prompt payment legislation?

Yes. Alberta's Prompt Payment and Construction Lien Act has applied to private projects since August 29, 2022, and owners have 28 calendar days to pay a proper invoice. Contracts with the Government of Alberta entered into on or after April 1, 2025, follow a separate prompt payment process under the Public Works Act.

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Does British Columbia have prompt payment legislation?

BC's Construction Prompt Payment Act received royal assent on November 27, 2025, but is not yet in force. Once in force, owners will have 28 days to pay a proper invoice.

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What is the holdback percentage in each province?

The holdback is 10% in Ontario, Alberta and Saskatchewan, and 7.5% in Manitoba.

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How long do I have to register a construction lien?

The lien period is 60 days in Ontario, Alberta and Manitoba, and 40 clear days in Saskatchewan. Alberta allows 90 days for the supply of ready-mix concrete and for oil or gas well work.

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How fast must a contractor pay its subcontractors?

In Ontario, Alberta, Saskatchewan and Manitoba, a contractor must pay its subcontractors within 7 days of receiving payment from the owner, unless it gives a notice of non-payment. In Ontario, Saskatchewan and Manitoba, a contractor that has not been paid must still pay its subcontractors by day 35 after invoicing the owner, unless it gives a notice of non-payment.

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What is construction adjudication?

Adjudication is a fast dispute process for construction payment disputes, run by a provincial body such as ODACC in Ontario. The adjudicator's decision is binding on an interim basis, which means it must be followed unless a court or arbitrator later decides otherwise.

Sources

Checked October 13, 2026.

• Ontario Construction Act, R.S.O. 1990, c. C.30
• Ontario Ministry of Transportation: Prompt Payment Administration Manual
• Ontario Bar Association: Key 2026 amendments (January 15, 2026)
• Osler: Ontario Construction Act amendments now in effect (March 2, 2026)
• Canadian Bar Association: Changes to the Ontario Construction Act
• Ontario Dispute Adjudication for Construction Contracts (ODACC)
• Government of Alberta: Prompt payment rules for the construction industry
• Government of Alberta: Extending prompt payment to the Public Works Act (May 15, 2025)
• Alberta Land Titles: Construction lien checklist
• Bennett Jones: Prompt payment legislation in Alberta
• McMillan: Alberta's Prompt Payment and Construction Lien Act (August 30, 2022)
• Saskatchewan: The Builders' Lien Act (consolidated)
• Saskatchewan: The Builders' Lien (Prompt Payment) Amendment Act, 2019
• Manitoba: The Builders' Liens Act, C.C.S.M. c. B91
• Manitoba Prompt Payment Adjudication Authority
• Federal Prompt Payment for Construction Work Act, S.C. 2019, c. 29, s. 387
• Order Designating Provinces Under Subsection 6(1) of the Federal Prompt Payment for Construction Work Act
• Government of British Columbia: Prompt payment legislation (updated August 20, 2026)
• McCarthy Tétrault: Québec adopts prompt payment regulation (September 8, 2025)
• Osler: Canadian prompt payment and construction law reforms (updated March 30, 2026)

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As a celebration of Small Business Month, 2M7 Financial Solutions is proud to announce its team will be featuring its simple, flexible funding alternative at the 2022 Small Business Summit in Toronto to help more Canadian companies succeed. Since its inception, 2M7 has been dedicated to providing small business owners in Canada with a simpler and faster borrowing solution – providing the cashflow they need to run and grow their operations, even if they don’t qualify for traditional business loans.“

It’s getting exponentially harder for small business owners to qualify for loans from banks and other financial institutions, so 2M7 strives to provide the fastest and least complicated alternative to help support our Canadian entrepreneurs,” said Avi Bernstein, CEO of 2M7 Financial Solutions. “We believe it’s more important than ever to help small Canadian businesses grow, and our team is excited to take part in this year’s summit to meet the small business owners who are the true backbone of our economy.”

2M7 has helped thousands of businesses get funding to hire staff, buy inventory, repair equipment, expand to new locations, and more. Designed specifically for Canadian small business owners, 2M7’s merchant cash advance solution gets companies the funding they need – faster. Based around simple terms and flexible repayment structures, small businesses can easily get the cashflow they need, while having peace of mind that repayments are based on their month-to-month sales performance. Unlike banks, 2M7 provides its clients with fast funding, depositing funds directly into their bank accounts within 24-48 hours to invest almost immediately in their operations, however they see fit.“

In this fast-paced era, 2M7 has been proudly helping Canadian companies bring their businesses online to establish a global reach, as well as financing the digitalization of their processes in order to streamline operations, so our team is excited for this year’s summit theme of Embracing Digital Disruption,” said Avi. “With an increasingly competitive business landscape, and the ease of accessibility to a global market, we’re proud to give small businesses the competitive edge to grow even faster.”

To learn more about 2M7’s merchant cash advances for small businesses, please visit the 2M7 Financial team at booth #014 in the Metro Toronto Convention Centre, on Wednesday, October 26^th, or to see how much funding your business qualifies for, click here.

About the 2022 Small Business Summit

The Small Business Summit is an annual event in Toronto that celebrates Small Business Month and focuses on helping entrepreneurs grow and succeed. The summit will bring together start-ups, business owners, and experienced professionals for a day of networking. Hosted in Toronto, the third-largest tech hub in North America, the 2022 event will be themed “Embracing Digital Disruption” and feature major keynote speakers.