Let’s take a hypothetical trip down “Merchant Cash Advance Lane”. Today, we’d like to present a fictional representation about how Synergy Merchant Services’ cash advance program works. Our business model is such that we encourage Canadian business owners to grow their businesses.
So let’s say you owned a lemonade stand. (Please keep in mind that this hypothetical example is completely on a much smaller scale than the parameters for our actual program.) And you found out that lemons were going on sale for half price for today only. Now you don’t have any cash on you but you would really like to pick up those lemons to increase the amount of lemonade that you can sell.
So you decide to ask your friend – “the bank” – for ten dollars. Before this friend of yours loans you the money, it is highly probable that he will have to contact the rest of your friends to ask whether or not you have ever borrowed money from any of them. Looking into your credit history would be an important step for this friend to take before letting you borrow anything.
Chances are this friend may also ask for you to forfeit your lemonade stand if you are unable to pay back the money you borrowed. Sounds like an unreasonable request, right? But this is what your friend, “the bank” is known for – requesting collateral. He has no intention of losing out on this deal. After all, you plan on buying lemons with his money, not yours!
After this usually long process has been completed, if your friend loans you the ten dollars, he will expect you to pay it back in…say, daily installments. “One dollar a day,” he insists. And when that first dollar is paid, don’t expect to only owe nine dollars. You are being charged interest. So whatever you pay will go towards covering your interest charges before the principal balance.
“What happens if I miss a payment?” you ask. “Well, I may increase your interest rate, charge you a late fee and even take over that lemonade stand of yours,” he replies. Sounds like a hard deal to agree to, but “the bank” has been your friend for years and besides…you don’t have any other alternatives.
But wait! Before you make the decision to borrow the ten dollars, you meet someone new. This new friend is not willing to loan you any money but instead would like to buy some of your future lemonade sales. The person – “the cash advancer” – is aware that you sell lemonade and trusts that you will continue to do so in the future.
Instead of charging you interest, “the cash advancer” is willing to advance you the ten dollars under the agreement that you will repay him fifteen dollars in the future. “You have no time limit,” he explains, “Simply pay me a small percentage of each of your lemonade sales until you’re able to pay off the entire fifteen dollars.”
“It doesn’t matter how long it takes for you to pay me back. If you don’t sell any lemonade one day, you don’t owe me anything,” he continues. Now you get to buy those lemons at the low cost and sell more lemonade than you ever have before! No hassles and no risk! Wouldn’t it be nice if we all friends like this?