As more people across Canada begin to utilize Merchant Advances many continue to wonder whether the cost is worth it. At first glance cost is often seen as more expensive then other lending alternatives However this article compares Merchant Advances to other alternatives in the space to help gain perspective on this issue.
Compared to Bank Lending
Accessibility is a large obstacle for business owners attempting to gain financial support from the bank & if a one does qualify for a loan from the bank it must be backed by upfront collateral and locked into fixed payments. The cost of a Merchant Advance does appear higher at first glance, however with no specific collateral required and no fixed loan payments looming when you have a slow month, the higher cost is offset by less personal and business risk.
Personal or Corporate credit cards are another alternative to bank loans, and can attained virtually cost free, unless a payment is missed. If payments are missed the cost can be exponentially higher then a Merchant Advance, which has the cost presented on day 1 with no hidden fees throughout the program.
Bringing in a partner is another non-traditional route that business owners may choose however this often means giving up 50%+ of all future profits of the business, paired with loss of total control of the business. Legal fees aside this option is very hard to measure the cost/benefit of this option depending whether the partnership benefits or essentially hampers the future of the business.
After reviewing the alternatives available, Merchant Advances can be quite an attractive and affordable option for business in need of quick access to capital. We encourage all of our clients to do their research, and hope this article has helped shed light on how Merchant Advances stand up in comparison to the other alternatives available.