Do you think that merchant loans in Canada are worth it? Ask this question to any business, and you will get surprised and confusing looks from them. The answer to the question is, maybe.
Right now, the financial sector of small businesses is in full chaos. As many lenders have tightened their loan qualification criteria, the small businesses are struggling to get a proper loan for their businesses. Merchant cash advances are one of the major alternative options that small businesses can rely on. However, the businesses should understand the dealings of the merchant cash advances and should not take it lightly while availing the loan from them.
Why Are Merchant Cash Advances Different?
For starters, the merchant cash advances are not technically a loan. It is a cash advance that depends on the credit card sales that get deposited in your merchant account. So, if you do not have the provision of credit card payments, getting such loans is not an option for you.
However, if you deal with plastics, the application process and the approval requirements are not that complicated. If you choose the merchant loans Canada for your business, you can get the fund quite quickly. Sometimes, the businesses can have access to the required fund within 24 hours of the approval of the loan.
The merchant cash lenders take a different perspective of your business that does not match with the perspectives of the banks and other lending institutions. The merchant lenders consider your credit card transactions to make sure that you have the cash flow to pay them back on time. That means, even if your personal credit score is below 500, it does not affect the cash advance you get from the lenders.
The only trouble is that the cost of getting a merchant cash advance can get pretty high. Sometimes the cost gets much higher than other financing options. That’s why the business owners need to pay attention to the terms that the lender is offering to make sure that the loan fits their requirements perfectly.
Complications of Merchant Cash Advance
Unlike a line of credit or a bank loan, there is more to an MCA than just an APR. The repayment terms of the merchant loans Canada are widely different than the traditional ones. Holdback is one of the biggest differences that merchant cash advance has compared to bank loans.
If you have never taken a merchant cash advance before, it is always better to understand the terms and regulations associated with it. The holdback, for example, is associated with the percentage of the daily credit card sales of your business applied for repayment of the loaned amount. In most cases, the holdback amount lies somewhere between 10% or 20% of the transaction. This percentage is usually fixed and it gets stopped once the full amount is repaid.
So, these are some of the details that you needed to know about merchant loans in Canada. Now that you know about this information, you should make sure to check every aspect of the loan before sealing the deal. While you can check the paperwork and documents yourself, it is always better to take the help of a lawyer to make sure you are not getting entangled in something you do not really want.