I’ve been writing recently about the differences between a traditional small business loan and a merchant advance. I’m not “bank bashing” – just stating a few facts about what a merchant advance is and how the application and approval process works. Clearly, for long term debt a bank or Credit Union is still the best option. For short term financing, a merchant advance can be a viable option.
A timely article was published a couple days ago in the Financial Post. The Canadian Federation of Independent Business commissioned a survey of 13,000 small businesses across Canada. Business owners were asked to rate their banks based on several factors: Financing (willingness to lend, lending terms, information requirements), fees, account manager issues (accessibility to, treatment and business understanding by account managers, and service (clarity of bank statements, access to branch, user friendliness of online banking).
The study was called the “Battle of the Banks” and revealed some interesting results. My interpretation of the survey is….ouch. The banks are ignoring the small business owner and the Credit Unions are clearly the preferred option.
For small business owners looking for an alternative to the bank (or credit union) a merchant advance is another option. Designed specifically for short term (less than 1 yr) financing, a merchant advance is based on sales history rather than credit history so approval rates are significantly higher than traditional bank or credit union loans.
article in the Financial Post written by Dan Kelly