Merchant Cash Advances: Rapid Business Funding Solutions | 7 Park Avenue Financial

You Are Looking for A Working Capital Loan In Canada

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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email-  sprokop@7parkavenuefinancial.com

Understanding Merchant Cash Advances  

Overcoming Cash Flow Challenges with SME Working Capital Loans and Business Cash Advance

An SME working capital loan (SME = small to medium enterprise) can easily help your business overcome its cash flow challenges.

It is an extension of the merchant cash advance concept, which originated with the financing of retail-type businesses. It can also help companies with bad credit overcome cash flow challenges.

Cash Flow Crunch? The Modern Solution for Canadian Businesses

Running a business with inconsistent cash flow creates sleepless nights and missed opportunities. Traditional lenders often can't move quickly enough when you need capital, leaving you stuck watching competitors grow while you wait.

Let the  7 Park Avenue Financial team show you how these short-term working capital loans provide the rapid funding solution you need. They typically deliver capital within days and have repayment terms that flex with your sales performance.

3 Uncommon Takes On the Short-Term Working Capital Loan -  aka the "MCA."  

1. MCAs can improve customer relationships by enabling businesses to maintain optimal inventory levels.
2. Using MCAs strategically during peak seasons can increase annual profitability more than traditional loans.
3. The data insights gained through MCA applications often help businesses discover unknown revenue patterns.

Did You Know?  

• 64% of Canadian small businesses seek alternative financing options
• The average MCA approval rate is 85% compared to 15-25% for traditional loans
• Typical funding time is 48 hours versus 4-6 weeks for bank loans
• 70% of businesses renew their MCA at least once
• Market growth rate of 20% annually in Canada

Understanding the Cost and Type of Financing  

Let’s look at the cost and type of financing we’re discussing.

Unlike traditional loans that have an interest rate, merchant cash advances (MCAs) utilize a factor rate, which reflects a fixed cost of capital based on future sales.

Your firm’s ability to maintain the proper level of cash is no doubt a continual challenge. We read daily in the business news about the reality of an upcoming recession… or not…, but to our clients, it always comes back to running and growing their businesses.

Addressing Finance Needs with Short-Term Working Capital Loans

So, how does the short-term working capital loan address your financial needs? A business cash advance is a type of short-term working capital loan from a  ' merchant cash advance provider ' that focuses on your sales and the funds that travel through your bank account on an ongoing basis. Rates are higher than bank financing, typically in the 2%  per month range, but the bottom line is that your loan is paid from ongoing sales.

This is not long-term loan financing!

Evaluating the Cost of Financing and Interest Rates  

So, is this financing, in fact, ‘expensive’? While traditional loans often have defined interest rates that can vary significantly, merchant cash advances do not operate on traditional interest rates but have a different cost structure.

We’ll let you decide because the newfound cash can generate more sales, negotiate better with suppliers via effective purchasing, and maintain positive relationships with suppliers and employees. They both like to be paid!

Eligibility and Requirements for Financing  

Eligibility for a merchant cash advance (MCA) primarily hinges on the business’s credit card sales volume, average monthly sales, and time in business. To qualify for an MCA, companies typically need to meet the following criteria:

• Minimum Average Monthly Sales: Most MCA providers require a minimum average monthly sales volume, usually between $5,000 to $10,000, over the last three to six months.

• Time in Business: Your business should have been operational for at least six months to a year.

• Physical or Online Presence: A legitimate physical location or a credible online presence is essential.

• Financial Documentation: Be prepared to provide bank statements and other financial documents to support your application.

Meeting these requirements can help ensure a smoother application process and increase your chances of securing the necessary funding.

Typical Requirements for SME Working Capital Loans  

Small to medium-sized enterprises (SMEs) seeking working capital loans, including MCAs, generally need to meet specific requirements:

• Annual Revenue: A minimum annual revenue of $100,000 to $500,000 is often required.

• Credit Score: A minimum credit score, typically 500 to 600, is necessary.

• Collateral: Some lenders may require collateral, such as inventory, equipment, or property, to secure the loan.

• Business Plan and Financial Projections: A solid business plan and realistic financial projections are crucial.

• Stable Cash Flow: Demonstrating a stable cash flow and the ability to repay the loan is essential.

These requirements help lenders assess the risk and ensure that the business can manage the loan repayment effectively.

How to Qualify for a Working Capital Loan

To qualify for a working capital loan, including an MCA, businesses should take the following steps:

1. Review Financial Statements: Ensure your financial statements meet the lender’s requirements.

2. Prepare a Business Plan: Develop a solid business plan and financial projections for the lender.

3. Provide Collateral: If required, be ready to offer collateral such as inventory, equipment, or property.

4. Demonstrate Stable Cash Flow: Show that your business has a stable cash flow and the ability to repay the loan.

5. Compare Lenders: Shop around and compare rates and terms from different lenders to find the best fit for your business needs.

By following these steps, businesses can improve their chances of securing a working capital loan and ensuring they have the necessary funds to support their operations.

Repayment and Interest Structures  

Repayment structures for MCAs typically involve a percentage of the business’s daily or weekly credit card sales. This means the repayment amount can vary depending on the business’s sales volume, providing flexibility in managing cash flow.

Understanding Repayment Options  

Businesses should be aware of the different repayment options available for MCAs:

• Fixed Repayment Schedules: A fixed amount is deducted from the business’s bank account regularly, providing predictability in payments.

• Flexible Repayment Schedules: The repayment amount varies based on the business’s sales volume, offering flexibility during slower periods.

• Daily or Weekly Repayments: A percentage of the business’s daily or weekly credit card sales is used for repayment, aligning payments with business performance.

• No Collateral Required: MCAs do not require collateral, but the business may need to provide a personal guarantee.

Understanding these repayment options can help businesses choose the best structure for their financial situation and ensure they can manage their cash flow effectively.

Common Uses for Short-Term Working Capital Loans for Businesses

Small businesses typically use these funds to grow their sales, reduce payables, etc. It’s important not to confuse the benefits of short-term working capital loans with other forms of cash flow financing. These include:

• Accounts receivable financing (A/R financing)

• Inventory finance

• Tax credit financing

And let’s not forget about term loans of a longer nature.

CASE STUDY  

A  Toronto restaurant experienced a sudden equipment failure, and traditional banks took weeks to approve the loan. However, through a Merchant Cash Advance, the business secured $50,000 within 48 hours, replaced the equipment, and increased revenue by 25% the following month.

The flexible repayment structure meant the business could focus on growth rather than fixed payment stress. Success led to an additional location within 18 months, all supported by strategic MCA funding.

Key Takeaways  

• Future revenue potential drives qualification rather than traditional credit metrics

• Repayment automatically adjusts with daily sales performance

• The application process focuses on business health over personal credit history

• Funding speed typically operates in days rather than weeks

• No fixed monthly payments create greater flexibility

• Future sales potential is a key factor in qualifying for merchant cash advances

Conclusion

Interested? Hopefully not confused!

Call  7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor who can assist you with your business finance needs.

FAQ

When can I get funded after approval?

Merchant Cash Advances typically provide funding within 24-48 hours after final approval.

How much can my business qualify for?

Qualification amounts typically range from $5,000 to $500,000 based on monthly revenue and business performance.

What are the qualification requirements?

Basic qualifications include 6+ months in business, $10,000+ in monthly revenue, and no active bankruptcies.

How do Merchant Cash Advances adapt to seasonal business fluctuations?

• Automatic adjustment to sales volume

• Lower payments during slow periods

• No fixed monthly payment stress

• Increased flexibility for seasonal businesses

• Better cash flow management options

What makes the approval process different from traditional loans?

• Focus on recent revenue rather than credit

• Simplified documentation requirements

• Faster decision-making process

• More flexible qualification criteria

• Less emphasis on personal credit history

Why do businesses choose MCAs over traditional financing?

• Speed of funding

• Higher approval rates

• Simple application process

• Flexible repayment structure

• No fixed payment schedule

What industries benefit most from Merchant Cash Advances?

• Retail operations

• Restaurants and hospitality

• Service-based businesses

• Seasonal businesses

• E-commerce companies

How does the repayment structure benefit business owners?

• Automatic payment adjustments

• No fixed monthly obligations

• Aligned with business performance

• Simplified cash flow management

• Reduced financial stress

What documentation is typically required for approval?

• 4 months of bank statements

• Business tax returns

• Proof of ownership

• Basic business information

• Merchant processing statements

How does the application process work?

• Online application submission

• Quick document review

• Same-day initial decision

• Funding offer presentation

• 48-hour funding completion

Are there any restrictions on fund usage?

• No restrictions on business use

• Freedom to invest in growth

• Ability to purchase inventory

• Option to upgrade equipment

• Marketing investment flexibility

What role does credit score play?

• Less emphasis than traditional loans

• Focus on business performance

• Recent revenue prioritized

• Bank statements matter more

• Holistic business evaluation

How do renewal options for a merchant cash advance work?

• Available after 50% repayment

• Based on payment history

• Quick approval process

• Additional funds possible

• Simplified renewal documentation

What distinguishes Merchant Cash Advances from traditional loans?

• Revenue-based repayment

• Faster funding process

• Higher approval rates

• More flexible terms

• Less documentation required

How does the cost structure compare to other financing options?

• Factor rate pricing

• No interest calculations

• Transparent total cost

• Predictable payments

• No hidden fees

What makes MCAs particularly suitable for Canadian businesses?

• Speed of funding  compared to traditional bank loans

•  Merchant cash advances offer Flexible qualification criteria from merchant cash advance companies

• Seasonal business friendly

• Simple application process versus a  bank business loan

• Canadian market understanding  based on a company's  sales or future credit card sales/debit card sales