Frequently Asked Questions About Merchant Cash Advance
How quickly can I receive funds from an MCA in Canada?
The speed at which your merchant account will receive funds from a merchant cash advance provider in Canada can vary, but it is generally much faster than a traditional business loan. Once your application is approved, you may receive the advance amount within as little as one business day.
The streamlined approval process and quick access to funds make merchant cash advances an attractive option for a smaller business in need of immediate financing.
Are there any restrictions on how I can use the funds?
Merchant cash advances are typically quite flexible when it comes to how you can use the funds. A business can use the cash advance for a variety of purposes, such as purchasing inventory, covering payroll, investing in equipment, or addressing unexpected expenses. However, it is essential to discuss any potential restrictions with your merchant cash advance provider when applying.
What are the average fees and interest rates for MCA in Canada?
Fees and interest rates for merchant cash advances in Canada can vary depending on the provider and the specific terms of the loan agreement. Instead of a traditional interest rate, MCAs use a factor rate, which is multiplied by the advance amount to determine the total pay back amount. Factor rates typically range from 1.1 to 1.5, which can translate to higher costs compared to regular loans. It’s essential to carefully review any hidden fees and factor rate associated with your MCA before agreeing to the terms to ensure you are fully aware of the payback amount.
How does the repayment process work?
The process to repay the advance is based on a future percentage of your business’s daily credit card sales. Your credit card processor will automatically deduct the agreed-upon percentage from your credit card receipts and forward it to the merchant cash advance provider until the advance is fully repaid. This means that your repayments will fluctuate depending on your day-to-day sales, providing flexibility for a business with inconsistent revenue streams.
Can I apply for an MCA if I have bad credit?
Yes, you can still use a merchant cash advance if you have poor credit. Since the advance is based on your future credit sales rather than your credit history, MCA sources often have more lenient credit requirements compared to traditional loans. However, having bad credit may impact the terms of your MCA, such as the factor rate and the maximum advance amount. It’s essential to discuss your specific situation with the merchant cash advance provider when applying.