When small business owners need access to financing, they will often start with a bank or credit union, and apply for a loan. If funding for their small business (in the form of fixed or variable rate loans) is not easily available, some may even try to bridge the gap with personal loans. However, in many cases, a line of credit is the best alternative.

Unfortunately, banks and credit unions have strict application processes that involve providing a lot of documentation. Being approved can also take weeks (or months), and require minimum credit scores that prove to be too high a bar for some. Online lenders, such as Merchant Growth, cut down on the waiting time and documentation, and are also more flexible. 

If small business owners want to stay out of financial trouble, they should speak with an experienced lender to gain a greater understanding whether or not working with large financial institutions is the best choice for them.

What is a Line of Credit?

Both financial institutions and alternative lenders offer secured and unsecured lines of credit, which are essentially used like a regular credit card. You can borrow, pay some back, take more out, and access financing on your schedule, based on your specific needs. 

Because you don’t need to re-apply for financing every time you need more, lines of credit are often referred to as “revolving credit.” You can use any amount within the limit, and there isn’t a deadline for repayment; you simply pay interest on the amount you borrow along with a minimum payment each month. Some financial institutions may charge fees for registration or administrative work. 

When Should You Use a Secured or Unsecured Line of Credit?

A secured line of credit requires an asset to be used as collateral, on the off chance that the borrower can’t repay the money. One example of a secured line of credit is a home equity line of credit. It has a higher credit limit and lower interest rates compared to other lines of credit. Traditional lenders are more willing to offer secured lines of credit because there is less risk involved for them compared to an unsecured line of credit. 

As you would expect, an unsecured line of credit is where the borrower does not need to provide collateral in order to receive funds. Some examples of this line of credit include personal lines of credit and student lines of credit. 

A personal line of credit can be used to consolidate higher interest rate loans while a student line of credit is often used for post-secondary education expenses. For businesses, some unsecured lines of credit come with a lien included, where the lender has the right to claim business assets if the borrower falls behind on payments.

The question: Is a line of credit worth it for your business?

What Are the Pros and Cons of a Line of Credit?

Small businesses benefit from flexibility since the funds can be used for a variety of purposes:

• Inventory Purchases
• Cashflow
• Technology Upgrades
• Unexpected Expenses

A line of credit is ideal for businesses that require capital, but don’t substantive lump sums for larger projects. Funds from a line of credit will always be available, saving you time from reapplying like with other loan products.

Unlike personal loans where you are given the money needed in one lump sum, lines of credit allow for a gradual disbursement of funds, so businesses use only what they need at that moment. They also only pay interest on what they have borrowed at the time. 

Business lines of credit can be cost-effective solutions for monthly needs, as long as there isn’t excessive spending and the owner makes regular monthly payments. (Keep in mind that paying only the interest will mean that your business will be in debt longer.) With a line of credit, you won’t be charged interest until you have an outstanding balance. 

Like most financial vehicles, a line of credit has its advantages and disadvantages. How and when it’s used is a major determining factor in its usefulness. Before you accept any terms and borrow money, carefully review the terms and conditions, the interest rates, and the repayment schedule. 

Ask your lender as many questions as you can think of to ensure you’re working with an experienced and trustworthy financial institution.

Is it Hard to Get Approved for Line of Credit?

Sometimes it is, yes. It can be harder to get approved for a line of credit with traditional lenders like banks, as they follow a strict process and have requirements that some businesses find burdensome. 

When applying, you don’t have a choice about the credit limit. The lender will review many aspects of your personal and business affairs as a way to determine a suitable credit limit.

How Does a Lender Determine Your Credit Limit?

Many lenders will review your credit history, personal and business credit scores, and gross annual income level. In order to qualify for a line of credit, most lenders have minimum requirements. This often means business must be in operation for at least a year, which makes it difficult for startups to access this type of funding early on. 

A traditional financial institution usually reviews your credit score, and many lenders require a score around 660. But that’s where online lenders become a better alternative, as some of them don’t use the credit score as a qualifying factor.   

While you don’t get to choose your initial credit limit, borrowers who exhibit a good financial standing and responsible usage of their line of credit will be given the opportunity to increase their limit. Lenders may inform the borrower that they qualify for a higher limit or the borrower can ask for one after a certain amount of time.

Getting a business line of credit is easier with Merchant Growth. 

Need to Borrow Money? Partner with Merchant Growth!

Merchant Growth’s minimum requirements for a line of credit are simple:

• Your company must be in business for at least six months.
• Your business must be located in Canada.
• Your monthly revenue must be 10K.

If businesses already use our Fixed Financing solution, we can also provide them with a line of credit if it suits their situation. 

Speak with our financial advisors, or apply now!

When your small business needs an alternative to loans and lines of credit, a merchant cash advance (MCA) could be the perfect alternative. 

But what is this financial product exactly? How does an MCA differ from a loan if it provides the borrower with money? How does a merchant cash advance work? Below, our team explains and discusses how this useful product can help your business maintain its operations at full speed, even during a cash crunch.

What is a Merchant Cash Advance?

A merchant cash advance is an alternative to traditional bank loans. A merchant cash advance is not classified as a loan, since it involves the sale of future revenue. As a result, it has its own terms and follows different regulations than that of a traditional loan. It’s also a quicker and easier way to get funds than applying to traditional banks that have a rigorous and a slow approval process.

When using an MCA, a lender provides the small business owner with a lump sum upfront. To repay the merchant cash advance provider, the owner promises them part of their business’ future credit card sales and debit sales each day. 

Small business owners will not owe anything until they generate sales in their business, and depending on the type of business and the terms of the MCA, the principal amount can be paid back daily, weekly, or on some other schedule.

What Type of Small Business Should Use a Merchant Cash Advance?

Merchant cash advance companies offer this financial product to businesses that:

• Have a high volume of debit and credit card sales
• Need funding right away
• Do not qualify for a traditional small business loan 

When loans and lines of credit aren’t an option, a merchant cash advance can provide significant relief from financial hardship and stress.

How Can Small Businesses Benefit from Merchant Cash Advances?

Now that you know what a merchant cash advance is, there are several ways a business can use it:

• Pay debts
• Purchase inventory
• Update equipment
• Hire staff
• Renovate or relocate your business
• Pay suppliers
• Advertise

Merchant cash advances are designed to match the fluctuating sales that small businesses—like those in retail—experience. Since the cash advance doesn’t have a fixed amount due each month, the lender collects a different payment amount each month. 

Therefore, repayment from your sales can be less when you are in a slow season, and increase as your business experiences more volume. While the provider will receive a different monthly amount, they will still take the same percentage from your sales. This flexibility allows for a stable cash flow, even in businesses that experience regular sales volatility.

Small business loans are not as flexible. If you use a small business loan, you will be stuck with a fixed repayment amount on a schedule that could end up negatively affecting your business bank account during slow periods.

Note: Using a merchant card advance does not build business credit like loans and lines of credit do. Additionally, it is not typical for providers to report your repayment history to business credit bureaus.  

What to Expect from Merchant Cash Advance Companies

There are a variety of merchant cash advance providers out there. Some cater to businesses with thin business credit or bad credit, while others offer high interest rates. Be aware that some providers will charge an origination fee and have higher than average factor rates, resulting in an annual percentage rate (APR) in the triple digits.

At Merchant Growth, we offer Flex and Fixed Financing solutions to accommodate businesses with differing operations and needs. We’re here to give small business owners the best solution.

Get Your Cash Advance from Merchant Growth

We help many types of small businesses with their cash flow problems. Our alternative financing options ensure that your business needs are taken care of in the best way possible. Receive funding for business growth within 24 hours as long as you meet our minimum requirements:

• The business is located in Canada
• Your monthly revenue is $10,000
• You have been in business for six months

Remember that a merchant cash advance is designed for businesses that take credit card payments. Still not sure which financial loan product is right for your situation? Contact us today!

If you think a merchant cash advance is right for you, apply now!

VANCOUVER, BC, Oct. 18, 2021 /CNW/ - Merchant Growth, Canada's fintech leader in small business financing, today announced it has secured C$4.1 million of equity capital. This round is backed by multiple individual investors well known in the fintech space and some of which have been Merchant Opportunities Fund investors for some time. This is the company's first external equity raise since inception in 2009.

With this investment, Merchant Growth will further develop its sales & marketing departments as well as its technology teams to offer new products that are consistent with its mission to provide the most convenient and accessible financing experience for Canadian small businesses.

David Gens, Founder, President & CEO of Merchant Growth notes: "The COVID pandemic has disrupted all sectors of the economy, but none more so than the small business sector. While extraordinary government stimulus programs have helped support the sector, these programs are transitory and small businesses will be forced to transition to other capital sources in the years to come. We want to do everything possible to ensure Canadian small businesses have access to capital once stimulus programs are no longer in place, and this funding helps us bolster our organization capabilities so that we can ensure we're ready to deliver that".

About Merchant Growth

Merchant Growth is a leading Canadian financial technology company that specializes in small business financing. Over the past decade, Merchant Growth has supported Canadian businesses with hundreds of millions of dollars in growth financing. Using an innovative approach that includes the latest technology, complete transparency and thoughtful customer care, Merchant Growth is committed to helping make business financing easy to understand and accessible. To learn more, visit: www.merchantgrowth.com.

SOURCE Merchant Growth

For further information: Sean Watkins | Director of Marketing | Merchant Growth | 416.846.6900 | swatkins@merchantgrowth.com

The days of having to go into the bank for every transaction you want to make are long gone, and now the era of the fintech is taking its place and continuing to grow.

According to the SmarterLoans State of Fintech Lending in Canada 2022 report. In 2022, when it comes to getting approval, 42% indicated that it was fast and easy, compared with only 39% in 2019 and 33% in 2018.

Same-day-funding has now become a standard with the majority (53%) of applicants now recieving received funds within 24 hours, a slight increase from 51% in 2020 (compared to 48% in 2019, and 43% in 2018). Beyond that, a total of 85% of borrowers received funds within 3 days.

So why does this matter and why are business owners turning away from traditional financial institutions?

Its simple people need cash quick and efficiently, which is something traditional sources of financing can't offer. Below is a more in-depth look into why the consumer has turned to online small business lenders.

It’s Quick

Most lenders can process loans in 1-3 days. For repeat customers many can approve funding the same day. Traditional lenders typically take up to 2 months to process loans.

Small businesses are very nimble and need to be quick to respond to opportunities. For example if a retailer has an opportunity to purchase inventory from a supplier at short notice, an on line lender can provide the funds needed to take advantage of “special” supplier discounts. A bank wouldn’t be able to help in this situation due to the time required to prepare all the required documents.

Convenient

Online lenders allow the client to do business from their home, office or smart phone. There’s no need to take time out of their busy schedule to make multiple trips to the bank. In addition, banks require financial statements, personal tax returns, and a business plan. These can take weeks to produce and after paying an accountant to produce them, are expensive. Most online lenders require bank statements, proof of sales volume and a recent Notice of Assessment form CRA. All of these documents can be uploaded, emailed or faxed to the lender.

Higher Approval Rates

Year after year the biggest challenge for small businesses is “access to working capital”. Banks typically require a business to be profitable for 5 years and meet very strict financial ratios. Banks don’t lend on working capital so if you’re looking to buy inventory or do a small renovation or hire staff or do more marketing, the bank flat out says no. Banks lend on equipment or real estate but not day to day working capital.

Most other on line lenders approve loans based on the sales history of the business rather than the personal credit history of the business owner. Many businesses are relatively new (under 5 years) that are showing good growth but because of their “age” don’t meet the banks minimum 5 yr requirement.

Flexible Terms

Clients have the option of choosing a fixed or variable payment option. With the variable option payments are based on the sales volume of the business. A percentage of sales is used as the payments that “ebb and flow” with the sales trends of the business. As business grows so do the payments. If the business slows down the payments are reduced. Most businesses that have seasonal sales trends prefer this option.

Clients can also choose the amount they repay on a daily basis and the length of the term. Some clients use the financing for seasonal inventory so they choose 3-4 month terms. Others use the loan for a 1 time project such as a renovation or marketing campaign and therefore choose a 12 month term.

Micro Payments

Small payments are made daily rather than a lump sum monthly payment at the end of the month. Most clients say this is much easier to manage from a cash flow perspective.

Our customer service that we offer is foundational to how we operate. Our goal is to find the right financing solution for each small business owner that we work with, because each business is unique, operates under different parameters, and has its own needs. Get started today and discover the right financing solution for your particular small business's needs.

If you’re researching a loan for your small business, it can be overwhelming given the number of options available. Banks are always the best option in terms of rates but loans are difficult to qualify for and can take months to get approved. And, if you’re a small business with less than perfect credit or you don’t meet certain profitability ratios, chances are you’ll get turned down by the bank.

Here’s some other situations where an online small business loan is usually a better option than the bank:

Not in business long enough

If you own a new business, a bank won’t even consider a loan. You probably need 2-5 years of profitability before you can even get an appointment at the bank. On the other hand, most online lenders will approve businesses that have been open for 6 months.

Smaller loan amounts

If you need $25,000 for extra inventory or a new marketing campaign? Banks typically aren’t interested in small loans (under $100,000) because they simply can’t make any money at bank rates. The cost of underwriting and administering a loan is the same regardless of the loan amount – so they just don’t do small loans. Online lenders have recognized this gap in the market and most offer loans as low as $5,000.

Getting caught up on bills

After a slow period, you simply need to get caught up on bills? Banks don’t lend money for working capital – they typically only lend money for assets they can secure like real estate or equipment. Online lenders provide funding for any business reason – inventory, marketing, equipment, taxes, or just a cash flow cushion.

Fast access to capital

Emergencies or opportunities can’t wait - you snooze, you lose. Small businesses need to act fast but getting approved for a loan at the bank can take weeks or even months. Most online lenders can provide funding in less than 2 days and usually the same day for loan renewals.

You have a poor to fair credit score

If you don’t have a near perfect personal credit score, the bank will turn you down regardless of the performance of your business. Many online lenders don’t require a minimum credit score, and will instead evaluate the business based on sales history and other factors related to your business.

Your business is not yet profitable

To get a loan from a bank, your business usually needs to show profitability for the past two or more years and meet multiple other financial ratios. Most online lenders look at the sales history of the business rather than the profitability of the business.

If you’re considering applying for financing this year, every lender – including banks, credit unions, and online lenders - looks at the same five categories of credit. Although the credit categories are the same, the credit scoring models that banks use can be drastically different than the credit scoring models that an online lender uses. For example, for a bank loan you need to show five years of profitability whereas an online lender requires only 6 months of sales history. Regardless of the “scoring” techniques here’s what every lender is looking for....referred to as the 5 C's of credit.

Character

Simply put, this is your reputation. When lenders evaluate character, they look at stability. For example, how long you’ve lived at your current address, how long your business has been open, how many years of industry experience you have, and whether you have a good record of paying suppliers and bills on time and in full. These days, social media profiles, activity, comments, and reviews of your business make it much easier to measure the “character” of you and your business.

Capacity

Capacity is arguably the most important factor a lender will consider in deciding whether to lend you money. It is essentially whether you have the capacity (ability) to repay the loan. Most traditional lenders have sophisticated debt to equity models but for the most part your current bank statements illustrate how/if you can repay the loan. For example if your average monthly ending balance is $1,000 and the loan repayment is $3,000 per month you probably won’t qualify.

Capital

Capital refers to the value of your assets minus your liabilities. In simple terms, how much you own minus how much you owe. The more capital/investment in your business – referred to as “skin in the game” – the better your chances of getting financing.

Collateral

In most cases the loan applicant will be asked what assets he/she can provide to secure the loan, commonly referred to as "collateral". For example, if you own a home, car, or other personal assets, those will be considered when a lender decides whether to grant your loan request. The more collateral you have, the more willing a lender will be to lend you money. Most online lenders don't require collateral but it helps improve your "score."

Conditions

Lenders consider a number of outside circumstances that may affect the borrower’s financial situation and ability to repay. The local economy, the industry, and the level of competition are factors every lender is looking at. For example if a business was in the oil and gas industry in Alberta in 2015 chances are they found it difficult if not impossible to access a working capital loan.

The cash flow concept is simple enough: It refers to the amount of cash (or cash equivalent) flowing into and out of your business. To have positive cash flow — crucial for any type of business to survive — you must have more money coming in than going out. If you’re spending more than you’re bringing in, you’ve got a significant problem.

Though the concept of cash flow is simple, managing small business cash flow can be challenging. Here is some practical information and advice as you start taking steps toward healthier cash flow management for your business.

Adjust How You Pay and Get Paid

If you’re like most businesses, you don’t have the luxury of always getting paid immediately for your sales. When customers fail to pay their bills on time, it can lead to serious cash flow issues. Requesting deposits when items are ordered, providing discounts and other incentives to customers who pay quickly, and identifying slow payers in your accounts receivable are a few ways you can minimize this problem.

It’s also critical to control the money that’s flowing out of your business. Regularly review your budget and look for any expenses you can cut. For instance, do you really need that new espresso machine for the break room? Other things you can do include:

• Setting up your payments to be spread throughout the month.
• Transferring your payments electronically as late as possible. Just remember that it can take a few days to process payments.
• Maintaining good relationships with your suppliers (so that they will be more understanding if you go through a rough patch).

Be Cautious with Extending Credit

Extending credit to customers is common, particularly for new businesses, but it can cause cash flow problems if your customers cannot pay their bills on time. Along with researching each customer, think about accepting credit cards. You may be charged for each transaction, but it’s well worth it if it prevents serious cash flow issues.

Look Where You Can Cut Costs

Another way to increase your available cash flow is to look where you can reduce costs, freeing up that money for other expenses. There are are a variety of ways this can be achieved from purchasing inventory in larger quantities, negotiating better rates, or simply cutting out the "nice to have" but not necessary costs.

Boost Revenue

Finally, think of ways to increase your profit margin. While there are obvious advantages to acquiring new customers and selling new products (such as more sales), try focusing on existing customers. Not only is it less expensive, but it doesn’t require your team to invest as much time.

Start by analyzing your customers — looking at what kinds of products they buy the most and why they buy them. Use that information to strategize your offerings and marketing tactics. Offering special promotions and exclusive discounts to long-time customers is another way to boost revenue.

Need some professional business support? Consider hiring a freelance business consultant who can work with you to create a customized marketing plan. You can find these professionals on freelance job boards and hire candidates based on ratings and rates.

Maintaining healthy cash flow is a must if you want your business to succeed long-term. Remember to figure out practical ways to manage your payables and receivables. Proceed with caution when it comes to extending credit, and determine how you can cater to existing customers to boost revenue. By following these tips, you can get your finances under control and put your business in a stable position to flourish.

If you’re a small business owner looking to borrow money to grow your business, searching various options for a small business loan has become time consuming, confusing and frustrating. Bank business loan applications are tedious, tiring, and cumbersome, but the more convenient online business loans cost more.

Why the difference? Here’s what you need to know.

Banks Get Money Cheaper

One of the reasons online business loans cost more for borrowers because they cost more for lenders, too. Banks have access to cheaper money from a couple of different sources.

First, there are the bank’s deposits/savings accounts from millions of Canadians. Banks have quick, easy, and cheap access to customer’s deposits and they use this money to make personal and business loans.

Second, the banks’ bank (otherwise known as the Bank of Canada) loans money to banks at lower rates than any other lender. The money that online lenders offer small business owners comes from investors like venture capital firms, hedge funds, and individuals/shareholders looking for a better return on their dollar.

Higher Risk Loans

Banks tend to deal with very low risk “sure thing” businesses and as such can offer lower rates. Most online lenders offer loans to business normally considered “higher risk” by traditional lenders. To take on this additional risk, online lenders charge higher interest rates. Instead of playing it safe, like the banks do, alternative lenders take more risk —so they need a bigger cushion in case things don’t work out.

Newer Businesses

Bank lending tends to focus on businesses that have been operating for at least five years. Younger businesses find it very difficult to even qualify for a traditional bank loan. New businesses without several years of healthy financial statements and revenue growth usually get the “thumbs down” simply because they don’t have a history of profit.

But increasing numbers of online lenders offer loans to businesses that have only been open for 6 months and they don’t ask for much, if any, business credit history to qualify. In these cases, the lender looks at sales history, industry experience and personal credit history.

Clients With Imperfect Credit Scores

Online lenders offer loans to business clients with less-than-stellar credit scores—a group that traditional banks shy away from, as they’re expected to have a higher risk of loan default. By evaluating a variety of financial factors, like your business’s revenue trends and cash flow results from your bank statements, online lenders might choose to take on this risk—but at a higher interest rate.

Convenience Costs Money

In most cases, getting an online business loan is much faster than getting one through a bank. You complete your application by filling out one or more simple online forms from your desktop or mobile device – no need to visit a branch. Loans through online lenders take less than 2 days compared to 2-3 months from the bank. If your “time is money” or you have an unplanned opportunity or emergency, the speed of an online loan is always worth the cost.

What are my options?

For every business, there are times when quick access to quick cash is critical.

Picture these scenarios: You run a busy restaurant and your walk-in cooler just died. Or the warm weather is coming up and you need to hire servers for the patio. But you don’t have the cash to fix cooler or hire the workers. In both cases, a short-term business loan can help. You get the money you need in 24 hours and repay it over a short period of time – usually anywhere from 3 months to 18 months.

In contrast, long-term business loans are typically much larger and have a repayment period of five to 15 years or longer, making them better suited to a real estate purchase, a business acquisition or major equipment purchases.

A traditional small business loan from the bank can be a good option in specific circumstances but the long application process – up to 6 weeks - for a bank loan can a non-starter when you need the cash for more immediate business needs. When unexpected expenses, or opportunities, require fast access to funding, your bank is not always the most suitable choice.

Fortunately a quick answer to your loan application is available online. Online lenders, like Merchant Growth can have a decision and funding in as fast as one business day.

Business owners don’t have time to spend searching and applying for a loan, therefore a quick answer and fast funding is increasingly important.

Short-term business loans typically come in smaller amounts ($5,000 to $100,000), carry repayment terms of a few months to a year or two, have less stringent qualifications and can provide quick cash - usually 1-2 days - at a much-needed time. However, short-term business loans generally have higher borrowing costs — something to keep in mind when you’re shopping around.  

What can I use my financing for?

There are several situations when a short-term business loan may be appropriate for your small business. Here’s the top three:

To manage cash flow gaps: Uneven cash flow is a common issue for seasonal businesses. Instead of running up expensive credit card debt or taking out a home equity loan to pay the bills, a short-term business loan or line of credit can help manage the slowdown.

For emergencies: What if your clothing store doesn’t have the cash in the bank to fix the broken register? What if you run a pizzeria and your only oven breaks down? Short-term business loans make sense in these types of emergencies. You can get quick cash for repairs, then repay the loan over a short time period — that way, you’re not still paying for a cash register or oven five years from now.

To buy inventory: To keep up with growing customer demand, you may need to buy more inventory. Or perhaps you have the opportunity to buy inventory at a discount from suppliers — but only if you buy it now. A short-term business loan could be your best bet, as long as you’re certain you’ll be able to sell the inventory to cover the costs of the loan.

A Fast Business Loan from Merchant Growth

Traditional banks often require collateral before approving your business for a loan. They also can rely heavily on the business owner’s personal credit. Merchant Growth offers unsecured short term business loans based on the sales history of your business rather than your personal credit history. With loans from $5000 - $500,000 you can apply for a Merchant Growth business loan or line of credit in less than 5 minutes. If you’re approved, you can have your funds in as fast as one business day.