Although the merchant cash advance industry has been thriving in Canada for about 5 years now (about 10 yrs in the US) there’s still a little confusion about how it works and some of the features and benefits. Not surprising though as small business financing options through the traditional lenders haven’t really changed since credit cards were introduced more than 50 years ago.
A previous blog described how a merchant cash advance works – you receive lump sum funding based on future credit and debit card sales and repay on a daily basis. Check it out
From a marketing perspective, we always thought the key feature of a merchant cash advance was the daily “ebb and flow” of repayments. Customers with seasonal businesses absolutely love this feature as it helps them manage cash flow through the peaks and valleys. However, customers that have relative steady sales through the year aren’t as “thrilled” about this feature – they like the concept of “pay as you go”.
A customer in the clothing business pointed this out to me a few months ago. She uses our merchant advance to buy inventory and only makes repayments when the inventory is sold – “it’s like pay as you go financing” she said. An interesting way to look at the service that we now include in our conversations with possible new clients.
The moral of this short story is “always talk to and, more important, listen to your customers”