Should I choose a Merchant Cash Advance or a Loan?

Should I choose a Merchant Cash Advance or a Loan?

Should I choose a Merchant Cash Advance or a Loan?

Having options is always great, or is it? There are so many financing options now available to small businesses that when the need for extra funds arises, it can all seem a bit overwhelming.

We’ve already addressed the different kinds of small business loans available in Canada and what you’ll need in order to apply for them in the Evolocity blog. In this post, we’ll drill down a little further into two popular alternative lending products; the merchant cash advance and the small business loan.

If you’ve never had to seek out financing for your business you may be wondering why someone would choose to apply for additional funds outside of their business banking institution. There are in fact a number of reasons thousands of business owners choose to go with an alternative financing solution:

  • They don’t qualify. Banks have become more restrictive with lending to small businesses post-recession.
  • They already have a loan balance with the bank and aren’t eligible for more. Additional funds may be required when a vital piece of equipment breaks, or a lucrative opportunity arises.
  • They need funding now. Obtaining a loan from a bank typically takes weeks and requires a fair amount of documentation.

The Benefits of Alternative Financing


Time-strapped business owners can apply online for their small business loans or merchant cash advances from the comfort of home when it’s most convenient for them.


The application is quick and requires only basic information and documents, which can also be uploaded online.


Processing times tend to be much quicker than traditional banks. Owners can receive $10,000 up to $250,000 in funds in as little as 48 hours. This tends to be the biggest benefit for small businesses, allowing them to either fix a problem quickly or capitalize on a time sensitive opportunity before it’s too late.


Approval rates tend to be more favourable compared to traditional institutions like banks. Why? Because credit is only one part of the equation. The technology platform used to evaluate an applicant, takes into account many different data points allowing it to assess the financial health of a small business quickly and efficiently.

Which small business financing solution is the right one for you?

Generally, when speaking about non-bank financing, there are two products available: Merchant Cash Advances and Small Business Loans. We’ve addressed why many small businesses choose to go the alternative financing route but which product is the best choice for you?

Merchant Cash Advances: variable payment, variable term

Merchant cash advances are a type of financing geared towards small businesses but they are technically not the same thing as small business loans. Merchant Cash advances are the purchase of the future debit and credit card sales that a business makes. The lender advances you the funds and withholds a small, agreed upon percentage of your daily card sales until the advance is paid back. This variable repayment makes this a great product for businesses that have steady daily sales or busier, seasonal highs. If your sales go up, you pay back faster. If your sales go down, or are zero on a given day then your repayment is smaller or even zero. Merchant cash advance’s are a versatile financial tool, great for a short-term cash infusion.

Small Business Loans: fixed payment, fixed term

There really isn’t much of a difference between a small business loan from a bank and an alternative lender. Both the repayment term and amounts are fixed so it’s an ideal product if you like knowing exactly how much your payments will be and how long you’ll be paying them for. As we mentioned earlier, where it differs is really the application process and review. The application is short, simple and can be completed online, and funding can happen in matter of days versus weeks. Small business loans are a tried and true financing option ideal for investment in the growth of a business.

Still wondering if a merchant cash advance or a small business loan is right for you? Find out which option is best for you and your business when you contact one of the small business financing specialists at Evolocity today!


Share this Post
Back to Blog