As the rise in popularity and exposure of Merchant Cash Advance solutions grow in Canada, a lot of people have wondered openly, is the cost of the money worth it. Certainly, it is not an inexpensive solution. But let’s take a moment and consider some other alternatives and place a merchant cash advance into perspective, shall we.
Compare with Bank Lending
When compared with traditional bank lending, there’s no question that the cost of a cash advance, on the surface, is higher. But take into account that there’s virtually no risk to the merchant – no upfront collateral is required, no personal guarantees sought, and no fixed loan repayments awaiting you even when you have a poor month, and you can start to see that the higher cost is generally offset by the reduction in personal and business risk.
Credit Cards?
Then there are other alternatives besides bank loans, most notably financing with personal or corporate credit cards. Now, financing with a credit card is virtually cost free, unless of course, you happen to miss a payment. And that’s where it gets prohibitively expensive. Far, far more than the cost of a cash advance.
Partners?
Then there are other more non-traditional routes. One option a lot of business owners take to share the operating costs, is to bring on a partner. And while the exact costs/benefits of such an arrangement are almost impossible to conclusively measure, most merchants will generally tell you that there is a definite cost of a partnership, be it an opportunity cost, or a real cost of a poor partnership.
Selling Assets?
Another potential source of funds is to sell off assets. But as anyone familiar with this process knows, most assets with any sort of depreciation will generally sell for pennies on the dollar. Again, a far more expensive proposition for any merchant.
And so, when you consider every alternative available, including the cost of a bank loan, and the shared risk that goes along with it, a Merchant Cash Advance, can be a very attractive…and affordable, option for many small businesses that need a quick infusion of working capital.
True North Capital, based in Toronto, is a Canadian cash advance firm with over a decade worth of experience in delivering timely funds to small businesses in Canada.
