Compare merchant cash advances and business loans to understand costs, repayment, and when each makes sense.
Merchant cash advance vs business loan: Merchant cash advance (MCA) offers fast approval (24-48 hours), based on future sales, automatic daily/weekly deductions, but very expensive (30-200% APR equivalent). Business loan offers lower rates (8-25% APR), fixed monthly payments, ownership of funds, but slower approval (1-4 weeks) and requires credit check. Best for MCA: Urgent needs, strong credit card sales, can't qualify for loan. Best for loan: Lower cost, predictable payments, want to build credit. MCA should be last resort due to high cost.
| Factor | Merchant Cash Advance | Business Loan |
|---|---|---|
| Cost | 30-200% APR equivalent (very high) | 8-25% APR (much lower) |
| Approval Time | 24-48 hours (fastest) | 1-4 weeks (moderate) |
| Repayment | Daily/weekly automatic deductions | Fixed monthly payments |
| Based On | Future credit card sales | Credit, revenue, financials |
| Credit Check | Minimal (based on sales) | Required (600+ credit) |
| Ownership | Selling future receivables | Borrowing funds (you own) |
| Best For | Urgent needs, last resort | Most business needs |
Not a loan—selling future credit card receivables for immediate cash. Provider advances funds and collects percentage of daily/weekly sales until advance plus fee repaid.
Traditional loan where you borrow funds and repay with interest over set term. Fixed monthly payments, lower rates, builds credit.
Learn how to get a business loan and explore all loan programs.
Warning: MCA should be last resort due to extremely high cost. Consider alternatives first.
Scenario: Need $50,000
Difference: MCA costs $8,528 more than business loan in this example. Business loan saves significant money.
Merchant cash advances are extremely expensive and should be avoided unless absolutely necessary. Consider these alternatives first:
Only consider MCA if you've exhausted all other options and understand the high cost.
No, it's selling future receivables, not borrowing money. You're selling a percentage of future credit card sales for immediate cash. This is why it's so expensive.
MCAs charge factor rates (1.1-1.5x) which translate to 30-200% APR equivalent. High cost because they're unsecured, fast, and based on sales not credit. Much more expensive than loans.
Yes, explore business loans first. Even with lower credit, alternative lenders offer loans at 15-30% APR, much cheaper than MCA. Learn about business loans with bad credit.
Consider refinancing with business loan to lower cost. Can save thousands in fees. Apply for loan and use proceeds to pay off MCA early if allowed.
Avoid expensive MCAs. Apply for a business loan and get a decision in 24-72 hours.
Fast decisions • Clear terms • Real people