How to get a merchant cash advance in Canada

A merchant cash advance (MCA) gives a business a lump sum now in exchange for a share of its future card sales. It is not a bank loan: there is no fixed monthly payment, and approval is based mostly on your card-sales history rather than your credit score.

That makes it useful for businesses a bank would turn down or keep waiting, and expensive if it is used for the wrong thing. This guide explains how it works so you can decide with the numbers in front of you.

How it works

A funding partner buys a fixed amount of your future card sales at a discount. You receive the advance, then repay it as a set percentage of each day's card sales (the holdback) until the agreed total is paid back.

The total is expressed with a factor. As an illustration only: an advance of $50,000 at a factor of 1.25 means $62,500 is repaid in total. If your holdback is 10% and you sell $3,000 a day by card, about $300 a day goes to repayment, and the advance is repaid in roughly seven months. A slow month means smaller payments and a longer repayment period.

Who qualifies

Funders look at a few basic points:

• A business in Canada that takes card payments, usually with several months of processing history.
• Steady monthly card sales. Funders look at your last three months of processing statements first.
• No requirement for collateral. Your credit score matters less than your sales history.

Timeline with SavPay

Through SavPay's funding partners, advances range from $10,000 to $300,000, based on your card-sales history and subject to approval. A decision usually comes in about 48 hours after we receive your last three months of statements, and funds arrive 1 to 2 business days after approval. Approval is never guaranteed: the funding partner makes the decision.

When it makes sense, and when it doesn't

An advance costs more than a bank loan. It is worth it when the money earns more than it costs, quickly:

• Good uses: inventory before a busy season, equipment that pays for itself, a time-limited opportunity, bridging a gap a bank can't fill in time.
• Poor uses: covering ongoing losses, paying off another advance, anything that won't bring in revenue within the repayment period.

Questions to ask before you sign

Ask for these in writing:

• The total amount to repay, in dollars, not just the factor.
• The holdback percentage and how it is collected.
• Any fees on top of the factor.
• What happens if sales drop sharply or the business closes.
• Whether you can repay early, and whether that lowers the total.