• Law
  • by Ken Vasquez
  • September 18, 2019

A complete guide about cash advance

What are cash advances?

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Having working capital is one of the top priorities for small business owners. Cash flow keeps your business moving, and so-called cash advances traders seem to be the fastest way to have cash at your disposal. But before launching to request a merchant loans Canada to go the fast way, you should keep in mind the following: This option can be more expensive than you expect. In this article, it will be explained in detail how cash advances work, their advantages, and what is required to request one. You will be surprised to know that there are other alternative loan options equally attractive and with more long-term advantages.

Basics about cash advances:

Cash advances are a financial option that allows consumers to access loans generally of small and short-term amounts. According to sales made by credit cards, companies receive a cash advance from a financial company by direct deposit. The financing amounts vary between approximately $ 5,000 and $ 1,000,000, depending on the annual sales made with a company’s credit card. Cash advances usually have a short term: financing lasts between 3 and 12 months. One of the benefits of cash advances is that lenders are generally very flexible concerning your credit score. In general, they do not require a minimum score and base their approval decision primarily on the activity of the merchant account.

Advantages of cash advances

  • Fast cash to reach your company’s goals.
  • A low credit score is not an inconvenience to apply. 
  • They may be suitable for seasonal businesses such as certain restaurants, shops, or tourist services where sales fluctuate.
  • The simple and uncomplicated application process, with fewer requirements than most commercial loans.
  • As with any other commercial loan, the cost (the lender’s fees or the factorial rate) can be deducted from your taxes.
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Requirements to request a cash advance:

Your annual sales must be at least $ 50,000 and you must have made credit card sales for at least two years. Your FICO credit score, however, is not one of the main requirements. This is different from most lenders, which rely on your credit score to assess how risky it is to grant you a loan and, therefore, calculate the interest rate that will apply to you. Cash advance lenders settle for low credit scores since they base their decision primarily on the activity of your merchant account.

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You probably already have an account with a credit card processor, but you may need to open a different account that is compatible with the lender’s requirements. To complete your application you will need your social security number and your tax identification number. In addition to answering general questions about your business, you will need some documents such as copies of your bank statements and credit cards. You may be asked for proof of citizenship or provide copies of your business rental agreements.

Applications are available online and are simple and fast. Approval usually takes only 24 hours and funds are available in a few days. Depending on whether you choose daily, weekly or monthly payment terms, you should start repaying the loan as soon as your merchant account is active.