Customized Merchant Cash Advance Financing Solutions

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You have made the decision to consider merchant cash advances as an overall small business financing strategy. You may have some type of financing in place currently but are not happy with a number of key issues that weren’t discussed when you set up that funding.

Let’s explore the three things you need to know around merchant cash advances in Canada and debunk some of the myths and misinformation that is out there on this subject. These are:

   1. All merchant cash advance funders are the same
   2. This financing is expensive
   3. Is this financing intrusive to my customers and suppliers?

The reality in Canada is that as a country we came late to the merchant advance party. This type of small business financing has been established for many years. As a result, the business financing that tends to dominate Canadian business, both in business model and pricing is heavily influenced by a small number of foreign firms, typically U.S. based.

We should probably do a very short ‘primer’ on merchant cash advances and this type of small business financing to ensure we’ve got the basics in place.

Essentially it is the sale of your future sales to a third party. It is very dominant in certain industries, i.e. hospitality, retail, etc. but quite frankly is now prevalent throughout Canada in many industries. What differentiates it is really the three points we’ll discuss – who is offering it to you, what it costs, and how does it work.

We recommend to clients that they deal with Canadian firms when considering a merchant advance option. Because this business financing is somewhat unique and misunderstood we strongly recommend you work with a trusted, credible, and experienced advisor in this area who can guide you through what many consider the factoring maze.

So let’s get back to our three key areas: First finance firms for small business financing vary in Canada by size, geography, and financial capability. You need to align yourself with a party that is most suited to your type of business, the size of your firm, and the ability to deal on a one on one basis on any issues that come up. As we stated, it seems common sense that your best partner will be a Canadian firm that has direct representation in your geographical area.

Let's move on to point # 2 - Is it expensive? We always hate saying this, but the answer is that it depends. This financing certainly has the aura of being expensive, and unfortunately, most clients we meet are always focused on the rate. A few key points need to be made, so let’s be clear on this issue. First of all merchant funding in Canada has a discount rate of between 1-3% per month. If your customer pays in 30 days Canadian business can be forgiven by saying – I paid 2% per month, that’s 24% per annum that is expensive.

One of the main points we can make when advising clients on a proper financing facility is that the funds you get on immediate cash conversion can be used to purchase inventory at a better price for cash, or alternatively, you can take the many 2% net ten day discounts many suppliers offer. If that was the case on all your business we can make the statement that you are recovering 100% of your financing costs via this strategy, plus you have unlimited working capital. That’s financial power.

In summary, small business financing via a merchant cash advance loan funding can be easily misunderstood. Assess what you think is wrong or might not work with this method of financing, and develop a financing strategy with the knowledge that you will not be making the mistakes of others who are less and ill-informed.

' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil

Merchant Cash Advances Small Business Financing 7 Park Avenue Financial