(links to previous posts below)
For a small business owner looking for financing, the words “bank loan” and “flexible” aren’t usually used in the same sentence. When – or if – a small business qualifies for bank financing there’s always the dreaded end of the month lump sum payment. Most lenders have one set of rules for a small business loan – pay this rate, this amount, on this day, every month. Period.
A few lucky business owners that have been in business for 5+ year might be fortunate enough to have a long term Account Manager that will give a few days grace but for the most part, regardless of how the business is performing, it’s the same payment every month.
This is where a merchant cash advance is different than a traditional bank loan. Instead of a monthly lump sum payment, a merchant cash advance is repaid every day based on a small percentage of yesterdays’ credit/debit card sales. There’s no fixed amount – if you have a good day you pay a little more, a slow day and you pay less. Payments “ebb and flow” with the sales trends of the business giving the business owner greater flexibility to manage cash flow.
Company Capital is unique in the merchant cash advance industry in that we let the business owner choose the daily percentage payment that best suits their business. Some clients prefer to pay less than 10% and therefore take longer to repay whereas others prefer to pay upwards of 20% so they can repay the advance quicker. Retailers that have seasonal inventory (clothing, hardware stores for example) typically repay quicker so they can re-finance for the next season of inventory.
This flexibility also provides the business owner with piece of mind should some “events outside their control” impact the business. Some of our clients have gone through some bad luck events that have seriously impacted their sales. Road closures, cars crashing through windows, Big Box competitors opening down the street and the worst of all…the floods in Alberta. These businesses sales declined (or in some cases disappeared) for a few weeks but because of the flexibility of a merchant cash advance, their payments also declined because of the percentage of sales payment system. A traditional lender – come hell or high water – will always take their fixed monthly payment regardless of how the business is doing.
Previous posts about a merchant cash advance: