Product

Merchant cash advance Canada: how the advance works and what it costs.

An advance against future card sales, priced with a factor rate and repaid as a share of daily sales or a fixed debit. Here is the arithmetic, the fit and the limits.

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What a merchant cash advance is

A merchant cash advance is not a loan with an interest rate. The funder buys a fixed amount of your future receivables at a discount. You receive the advance now, and you repay the agreed total, called the payback, from future sales.

Because the total is fixed on day one, the cost is a single number you can see before you sign. That is why the factor rate, and not an APR, is how these advances are priced.

Worked example

A restaurant in Toronto receives a $50,000 advance at a 1.25 factor rate.

Total payback: $50,000 × 1.25 = $62,500.
Cost of the advance: $62,500 − $50,000 = $12,500, or 25% of the amount advanced.
Over about six months (roughly 126 business days) that is close to $496 a day.

Who it fits

Businesses with steady card or deposit volume: restaurants, salons, retail, clinics, auto service.
Owners who need money quickly for inventory, a repair, payroll or a short-term opportunity.
Files that a bank would decline on collateral or paperwork but that show healthy deposits.

It fits less well when margins are thin enough that a daily payment would strain the month. The affordability calculator tests that before you apply.

Typical starting points

Monthly revenueTypically from around $20,000 a month in deposits for Canadian files. The exact line varies by funder and by file.

Time in businessTypically about 12 months. Newer businesses can be reviewed, but the options narrow.

Account healthLimited low-balance or negative days. Funders read the last few months of bank statements for this.

CreditScores from 500 are considered. A score of 600 or higher opens more options and better offers.

DocumentsA signed application and recent business bank statements, typically the last four months.

Existing advancesFiles with an existing advance can be reviewed, including second position.

What to ask before signing

What is the total payback, in dollars, not the rate?
Is the payment a fixed debit or a percentage of sales that flexes?
What happens if a month comes in weak?
Is there a discount for paying early, in writing?
Are there fees deducted from the advance?

Every figure on this page is illustrative arithmetic in Canadian dollars. It is not an offer, a quote or a promise of approval.

Common questions

Is a merchant cash advance a loan?

Not legally. It is the purchase of future receivables at a discount, repaid from sales. Practically, you receive money now and repay more later, which is why the total payback is the number that matters.

What is a factor rate?

A multiplier applied to the amount advanced. A 1.25 factor on $50,000 means $62,500 is repaid. See the factor rate guide for the full table.

Can I get one with bad credit?

Scores from 500 are considered, because deposits and account health carry more weight than the score on this product.

How fast is it?

Decisions are often the same day and funding can follow the next business day once the file is complete.

Can I pay it off early?

Some agreements include an early-payoff discount and some do not. Ask for the terms in writing. The early payoff guide lists what to request.