Merchant Cash Advance Loan - Working Capital | 7 Park Avenue Financial

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The New Wave of Financing: How Merchant Cash Advance Companies are Transforming Canadian Business

UPDATED 08/22/2025

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Understanding Merchant Cash Advances / Short-Term Working Capital Loans  

Cash Flow Crisis? Your Business Doesn't Have to Suffer  

Your business faces unexpected expenses, but banks reject your loan application.

Bills pile up while you wait weeks for traditional financing decisions. Meanwhile, competitors gain ground and opportunities slip away.

Let the 7 Park Avenue Financial team show you how short-term working capital loans, also known as Merchant cash advances solve this crisis by providing immediate funding based on your daily sales, not your credit score or collateral requirements.

Understanding Merchant Cash Advances & Short-Term Working Capital Loans in Canada    

Small businesses, retailers, restaurants, and service providers often face challenges accessing traditional bank financing. One flexible alternative is the Merchant Cash Advance (MCA) (from a merchant cash advisor) - also known as a business cash advance or short-term working capital loan.

Three Uncommon Takes on Merchant Cash Advances  

1. Seasonal Business Accelerator: Rather than viewing MCAs as emergency funding, savvy retailers use them strategically to stockpile inventory before peak seasons, maximizing profit margins when demand surges.
2. Revenue Smoothing Tool: Businesses with irregular income streams use merchant cash advances to create predictable monthly expenses, making cash flow management easier than traditional variable-payment loans.
3. Credit Building Bridge: While MCAs don't directly improve credit scores, successful repayment can demonstrate business stability to future traditional lenders, creating a pathway to better financing options.

What Is a Merchant Cash Advance in Canada?

A Merchant Cash Advance provides a business with a lump sum of working capital in exchange for a percentage of future sales or credit card transactions. Unlike a traditional loan, it is structured as a business loan , an advance against projected revenues rather than fixed debt on your balance sheet. Merchant cash advances differ in that they are short term installment loans, typically payable over 12-24 months.  They are typically unsecured, versus a bank secured business loan.

How Does a Merchant Cash Advance Work?  

Repayment is tied directly to your sales performance. A fixed percentage—typically 10% to 30% of daily or weekly credit/debit card sales in your business bank account—is automatically applied to repay the advance. This makes payments flexible: more is paid back during high sales periods, less during slower periods.

Example: If a business receives a $10,000 advance, repayments are deducted as a share of future transactions until the balance (plus fees) is cleared.

Who Benefits Most from Merchant Cash Advances?

Merchant cash advances are best suited for:

• Retailers, restaurants, and hospitality businesses with steady credit card sales

• Companies needing fast working capital for payroll, inventory, or expansion

• Businesses denied traditional bank loans but generating consistent sales revenue

• Firms with seasonal or fluctuating revenues, since payments adjust with sales volume

What Are the Advantages of Merchant Cash Advances?  

• Fast approval and funding—capital can be received in 24–48 hours

• No traditional collateral required—future sales act as repayment security

• Flexible repayment—payments rise and fall with sales volume

• Useful for short-term needs like covering expenses, bridging cash flow gaps, or financing growth opportunities

What Are the Downsides of Merchant Cash Advances?  

While convenient, MCAs are typically more expensive than bank financing:

• High costs—fees are based on a factor rate (1.1 to 1.5+), not a standard APR

• Impact on margins—businesses with low profit margins may find repayment burdensome

• Not ideal for long-term financing—best used for short or intermediate-term cash flow needs

How Do Fees and Rates Work for Merchant Cash Advances?

Instead of an interest rate, MCAs use a factor rate. Example:

• Advance: $10,000

• Factor Rate: 1.3

• Total Repayment: $13,000

Rates are based on sales history, repayment time, and business risk profile.

Can You Qualify for an MCA Without Credit Card Sales?  

Yes. While MCAs are commonly based on card transactions, some providers approve funding using overall business sales via bank account deposits (ACH repayments).

Are Merchant Cash Advances Right for Every Industry?  

Not always. Businesses with:

• Low card transaction volumes (e.g., B2B, wholesalers, manufacturers)

• High ticket, low-frequency sales

• Tight profit margins

…may find MCAs less suitable, as repayment could erode profits.

What Happens If You Struggle to Repay a Merchant Cash Advance?

If sales decline, providers may:

• Adjust the repayment percentage

• Extend repayment terms

However, prolonged repayment often leads to higher fees compared to fixed-term financing.

How to Apply for a Merchant Cash Advance in Canada  

The application is simple compared to bank loans. You’ll typically need to provide:

• Business bank statements

• Credit card processing reports

• Proof of consistent monthly sales

Many lenders also require the owner to personally guarantee repayment.

How Long Should a Business Use Merchant Cash Advances?  

MCAs are designed for short-term financing needs. Long-term reliance can be costly. Businesses should combine them with a longer-term financing strategy (such as term loans, lines of credit, or asset-based financing).

Case Study: Benefits of Merchant Cash Advances  

Company:  (Family-owned Italian restaurant chain)

Challenge: Needed $75,000 immediately to purchase equipment for new location opening, but bank loan approval would take 6-8 weeks, risking the prime real estate opportunity and delaying the planned grand opening by two months during peak season.

Solution: Secured $75,000 merchant cash advance within 48 hours based on strong credit card sales from existing locations, allowing immediate equipment purchase and timely restaurant opening.

Results: New location opened on schedule, generated $45,000 monthly revenue from day one, and fully repaid the advance within 11 months while maintaining healthy cash flow across all locations.

Conclusion: Is a Merchant Cash Advance Right for Your Business?  

Merchant Cash Advances can be a lifeline for Canadian businesses that need fast working capital but don’t qualify for traditional loans. However, they should be used strategically, with full awareness of costs and repayment obligations.

�� Contact 7 Park Avenue Financial—Canada’s trusted business financing advisors—to discuss merchant cash advance financing and short-term working capital solutions tailored to your business.

Frequently Asked Questions (FAQ)  

What is a Merchant Cash Advance?

An MCA is upfront financing where businesses receive cash today in exchange for a share of future sales.

How is it different from a loan?

Unlike loans, MCAs don’t require collateral or fixed installments. Repayments fluctuate with sales volume.

How quickly can I get funding?

Most businesses receive funds within 24–48 hours once approved.

What industries use MCAs most?

Retail, food service, e-commerce, and hospitality are the most common MCA users.

Are MCAs expensive?

Yes. Factor rates are higher than bank loans, so businesses must weigh costs carefully.

Can I still qualify without credit card payments?

Yes. Some lenders base repayments on overall business revenues via bank withdrawals.

Statistics on Merchant Cash Advances  

• 73% of merchant cash advance recipients receive funding within 48 hours

• Average advance amounts range from $10,000 to $150,000 for small businesses

• Businesses typically qualify with monthly sales volumes exceeding $5,000

• Factor rates commonly range from 1.10 to 1.50 times the advance amount

• 67% of MCA users are retail, restaurant, or service-based businesses

• Approval rates exceed 80% for businesses meeting basic volume requirements  

Citations

1. Small Business Administration. "Alternative Lending Report 2024." SBA Office of Advocacy, 2024. https://www.sba.gov
2. Fundera Research Team. "Merchant Cash Advance Industry Analysis." Fundera Business Funding, 2024. https://www.fundera.com
3. Canadian Federation of Independent Business. "Small Business Financing in Canada." CFIB Research, 2024. https://www.cfib-fcei.ca
4. Federal Reserve Bank of New York. "Small Business Credit Survey: 2024 Report on Employer Firms." Federal Reserve System, 2024. https://www.newyorkfed.org
5. Biz2Credit. "Small Business Lending Index Annual Report." Biz2Credit Research, 2024. https://www.biz2credit.com
6. 7 Park Avenue Financial. " Cash Advance Working Capital". https://medium.com/@stanprokop/cash-advance-working-capital-turn-tomorrows-sales-into-today-s-growth-8b7811a2810d