Merchant Cash Advance In Canada: How Does It Work?


Are you a Canadian business owner in need of quick access to capital? If so, understanding what a Merchant Cash Advance (MCA) is could be instrumental in helping you make informed financing decisions.

In simple terms, an MCA provides businesses with a lump sum payment in exchange for a portion of their future credit card sales. Unlike traditional loans, which involve fixed monthly repayments, MCAs allow for flexible repayment structures based on the company’s card revenue.

1. Comparison With Traditional Loans

Traditional loans involve borrowing a specific amount of money with interest charged on the principal amount over time. This means borrowers have to make fixed monthly payments regardless of their actual revenue flow.

In contrast, merchants repay the MCA by the provider withholding 6-15% of their monthly revenue. These amounts are flexible. Traditional loans often require collateral as security against defaulting on repayments while MCAs generally do not require collateral since they are based on future revenue projections rather than assets.

Additionally, MCA applications are typically more straightforward and faster compared to lengthy bank loan processes. MCAs provide businesses with quick access to capital based on projected future sales volume without requiring collateral or strict monthly repayment schedules like traditional loans do.

2. How Does a Merchant Cash Advance Work?

When it comes to understanding how a merchant cash advance (MCA) works, there are several crucial aspects to consider. First and foremost, businesses need to meet specific eligibility criteria set by the MCA provider. The criteria usually include revenue requirements, time in business, and credit card sales volume.

The revenue requirements ensure that the business generates enough income to support the repayment of the advance. Time in business demonstrates stability and reduces risk for the MCA provider, while credit card sales volume plays a role in determining the maximum amount a business can qualify for.


The eligibility criteria for obtaining a merchant cash advance vary between providers; however, they generally aim to assess the financial stability and potential for repayment of the borrower. Revenue requirements are typically based on a minimum monthly income threshold that ensures businesses can generate sufficient cash flow to cover their daily expenses and remittances toward loan repayment. Here is what we at Vital Payments require.

Documents required for credit decision:

  • 6 months processing statements (if not existing Vital Payments client)
  • Valid driver’s license
  • 2 months’ bank statements for capital requests > $25K
  • 2 recent tax returns for capital requests > $75K

For merchants to be eligible for our Merchant Cash Advance, they must:

  • Have an active MID with Vital Payments 
  • Be in business for at least 6 months
  • Generate > $1,000 in monthly credit/debit card volume
  • Not operate in a restricted MCC

Click here to contact us or call 1.888.519.1958 for any additional information. 

Top reasons for credit decline

The current approval rate is 85%. Here are the six reasons for a credit decline:

  • Open bankruptcy in the last two years
  • Excessive business tax liens with no payment plan
  • If the request is >$25K the merchant can not have 15 or more None Sufficient Funds
  • A Decrease of 30% or more over the last 7 days’ processing volumes vs. the previous 30 days
  • FICO score of 500 or less
  • Card-not-present transactions that represent more than 40% of their total processing volume

3. Application Process and Approval Times

An appealing aspect of applying for a merchant cash advance is the convenience provided by online applications. Unlike traditional bank loans requiring mountains of paperwork and lengthy processing times, MCA applications can be completed online with ease. MCA providers understand that time is of the essence for small businesses seeking quick access to capital.

Therefore, once an application is submitted, approval is typically granted swiftly. The approval timeline usually ranges from a few hours to a couple of days, ensuring that business owners can address their immediate financial needs without unnecessary delays.

4. Determining the Advance Amount and Terms

After the application is approved, the MCA provider evaluates the credit card processing statements of the business to determine the advance amount and terms. These statements serve as crucial evidence of past sales performance and are used to calculate the factor rate or holdback percentage. The factor rate is essentially a multiplier applied to the advance amount.

For example, if a merchant receives an advance of $10,000 with a factor rate of 1.1, they would need to repay $11,000 in total. On the other hand, holdback percentage refers to the portion of daily credit card sales that will be retained by the MCA provider until repayment is complete.

5. Advantages of a Merchant Cash Advance in Canada

One of the key advantages is the unparalleled flexibility it offers business owners in using the funds they receive. Unlike traditional loans that may require borrowers to specify and justify their spending plans, an MCA allows entrepreneurs to spend the money as they see fit.

Whether it’s investing in new equipment, expanding inventory, renovating the workspace, or even marketing campaigns, there are no restrictions imposed on how the funds are utilized. This level of freedom enables businesses to address their unique needs and seize growth opportunities without interference or limitations.

Quick access to capital

For businesses facing urgent financial needs, such as unexpected expenses or short-term cash flow gaps, a merchant cash advance provides a lifeline through its swift access to capital. The funding process for an MCA is typically expedited compared to traditional financing options like bank loans. Online platforms and digital applications have streamlined the application and approval process significantly.

No collateral required

Unlike many other forms of financing that often demand collateral as security against default, a merchant cash advance stands out as an unsecured financing option. This means that businesses are not required to pledge any assets (such as property or equipment) as collateral when seeking an MCA in Canada.

This reduces risks for business owners who may be hesitant about offering personal assets as guarantees for borrowing purposes. The absence of collateral requirements grants peace of mind while also opening 


Making informed decisions about Merchant Cash Advances requires careful consideration of various factors such as cost implications and impact on cash flow. Understanding factor rates versus interest rates enables you to compare total repayment amounts accurately and select the most suitable option for your business’s financial health. It is equally important to assess how daily or weekly deductions will affect your available funds and ability to meet other financial obligations timely.

By evaluating these aspects thoughtfully, businesses can make confident decisions about pursuing merchant cash advances that align with their specific needs and goals. 

If you’re looking for a Merchant Cash Advance, consider exploring Vital Payments. We provide fast, convenient, and cost-effective financing options to support your requirements.

Click here to contact us or call 1.888.519.1958.

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