How Merchant Advance Capital Works in Canada And Why Retail Merchant Financing Produces Cash Flow

Updated: March 06, 2011

One of the key advantages of this type of financing is that there is no additional debt on your balance sheet - as we noted, there is no fixed payment by our firm - instead a portion or percentage of future sales is used to pay down the loan you receive. You continue paying down the merchant advance capital loan until the loan is totally retired.

In actuality though you are also in a position to renew or increase the loan even during the duration of the initial repayment - in effect it becomes a 'top up' to your loan. Clients often ask how long the loan can be for - and typically the answer is one year or less.

So why is this type of financing attractive to many Canadian businesses? The reality that most business owners and managers realize is that cash flow fluctuates, as of course do sales. On occasion there are what we can call 'bulges' of activity that require you to purchase more inventory, and, conversely, there are always periods of slowness due to seasonality, etc. So business owners can take solace in the fact that as sales slow down so does the payments on their retail merchant financing loan, since, as we stated, you only pay back the financing from future sales.

Are there alternatives to this type of financing? Of course there are, and typically many clients we speak to have attempted to obtain cash flow financing from their Canadian chartered bank. If your firm is viewed by the bank as retail, or cash business, and you have an inventory component to your business you have of course discovered the general reluctance of banks to participate in this type of financing. Certainly that is the case without you providing additional personal collateral and equity in your business, which many business owners simply cant or don't want to do.

Featured Research
  • Video Conferencing

    For many, the mere mention of video conferencing brings about bad memories of conference rooms full of people staring at a screen with dodgy sound, fuzzy images, and broken connections. What if we were to tell you that over the past decade, video conferencing solutions have evolved to where they are affordable to businesses of every size and have evolved beyond just the standard boardroom. Today, 74% of B2C marketers and 94% of B2B marketers use video in their marketing efforts. more

  • EHR Implementation

    More and more medical practices are selecting and implementing electronic health records (EHR) than ever before. In fact, statistics show that the number of practices who have purchased an EHR has doubled in just three years. That being said, many practices fail to prepare for their new EHR and thus do not gain the full benefits that come with implementing a solution. more

  • Selecting the Right EHR for Your Practice

    The purchase and implementation of an electronic health record (EHR) system is no small feat and is a big step for a practice, small or large, to take. Selecting your new EHR is one of the most important decisions that you will make for your practice. more

  • 8 Ways Business Travelers Can Save with VoIP

    Do you or any part of your workforce travel for work, or even telecommute? If that answer is yes, then you should be utilizing mobile VoIP. With VoIP, businesses have been found to save as much as 40% on local calls and a whopping 90% on international calling expenses. more

  • Top 10 Contact Center Tools for an Unforgettable Customer Experience

    It should come as no surprise that consumers have only increasingly become less and less brand loyal in the modern age. In fact, 89% of them have switched brands within the last year due to a poor customer experience. One of the major steps to preventing this customer churn is to invest and invest heavily into improving your customers' experience. Now the major question to ask yourself is, "of all the contact center tools available, what are the ones that I should be utilizing for my business?" more