For many small businesses across Canada, some form of borrowing is the only realistic means by which one has of obtaining access to cash that may be needed for any number of things from repairs to upgrades. Until very recently, one of the only options available to small business owners was to apply for a small business loan. These are generally obtained by banks or dedicated lending institutions and come with a wide range of requirements.
To simply qualify for a small business loan, most lenders require that you have at least good, if not great, credit. There is a good chance that some form of collateral will be required. This is used as “protection” against the principal of the loan. If you cannot repay your loan, the collateral can be taken as a means for the lender to recoup at least some of what was lent. There are often restrictions and limitations as to what can be done with money obtained through a small business loan.
Repayment for small business loans is very stringent and has no relation to the amount of business or revenue one is bringing in. Typically, a small business loan is extended at a specific amount of interest, though sometimes the interest can be variable. Payment is rigidly scheduled as a monthly payment which will incorporate part of the principal along with interest. This payment will be due at the same time every month, regardless of your revenue stream. Failure to make a payment can lead to a range of expensive penalties that will be added to the overall total of the loan.
The strictness of a small business loan is part of the reason why so many small business owners simply don’t make repairs or upgrade their establishments. There is a big fear about not being able to make payment during more lean months and there are also many small business owners that simply wouldn’t qualify for a small business loan due to poor credit or inadequate collateral.
This is why so many small business owners have turned towards what is called a merchant cash advance (MCA). These advances are available through reputable lenders like Canadian Merchant Cash Advanceand offer a unique way for small business owners to obtain the cash they need for any purpose. With an MCA, even people who have poor credit can qualify for as much as $50,000 and be approved in as little as 24-hours. You do not have to put up collateral to qualify for an MCA.
The repayment of an MCA is also unique. Since it isn’t a business loan, it isn’t repaid as a monthly specified payment amount. Rather, each time you have a transaction, a small portion of it will be used to repay the advance. Your repayment will be a function of the amount of business you do in a given month. Many small business owners are far more comfortable with repayment based on revenue as opposed to a monthly payment that stays the same, regardless of how much revenue has been brought in.