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
  • The 2017 CRM Comparison Guide: Q2 Edition

    If you’re in the market for CRM software, we’ve got good news. We’ve updated our CRM comparison guide for Q2. more

  • 2017 Business VoIP Features

    If you’re considering an investment into a new VoIP system (or upgrading an old one), it’s important to understand what features are available and which ones your business will actually need. Especially if you want to keep costs at a minimum. more

  • 10 Reasons Why  Automated Agents  Aren't the Answer

    Automated customer service agents are a tempting option. They never need time off. You don’t have to pay them a salary. They don’t even need a physical workspace. But despite these advantages, they remain a poor substitute for live agents. more

  • Get the ERP Solution You Want in 5 Steps

    An effective Enterprise Resource Planning (ERP) solution is a must-have for any growing business looking to quickly improve the flow and efficiency of various internal processes. more

  • ERP in the Government Sector

    Enterprise Resource Planning (ERP) solutions have helped businesses improve the flow of key internal processes. That said, there’s yet another professional sector that’s benefitted, too … more