Two of the most common ways to fund a business are a merchant cash advance (MCA) and a term loan. They solve different problems. Here’s how they compare.
At a glance
| Merchant Cash Advance | Term Loan | |
|---|---|---|
| Speed | 24–48 hours | Days to weeks |
| Repayment | Share of daily/weekly sales | Fixed instalments |
| Cost | Higher (factor rate) | Lower (interest/APR) |
| Qualification | Cash-flow based; flexible credit | Stronger credit & financials |
| Best for | Fast, short-term needs | Planned, larger investments |
How they differ
Repayment. An MCA takes a fixed percentage of your sales, so payments flex down when business is slow. A term loan is a fixed instalment regardless of how sales are going.
Cost. A term loan generally costs less overall. An MCA is priced with a factor rate and costs more — you’re paying for speed and flexibility.
Qualification. Term loans lean on credit and financial history. MCAs lean on your cash flow and card/deposit volume, so they’re often accessible to businesses with thinner credit.
When to choose each
- Choose an MCA when you need capital fast, have steady sales, or don’t qualify for a bank loan yet — for a repair, inventory, or bridging a slow stretch.
- Choose a term loan when you have time and strong financials and want the lowest cost for a planned, larger investment.
Want the specifics? See our full guide to the merchant cash advance, or tell us your situation and we’ll help you compare.