1. Why this question comes up so often
When a business owner applies for funding, they usually say they want “a loan.” But that term covers a lot of ground — and getting into the wrong product for your situation costs real money.
The two products we field questions about most are merchant cash advances (MCAs) and term loans. They serve different purposes, repay differently, and get priced differently. Understanding the distinction before you apply puts you in a much better position to negotiate.
2. What’s a Merchant Cash Advance?
An MCA is not technically a loan. It’s a purchase of your future receivables. A lender gives you a lump sum today in exchange for a fixed total repayment, collected in daily or weekly increments from your bank account.
Key characteristics:
- Repayment is automatic, drawn from your account on a set schedule
- The cost is expressed as a factor rate (e.g., 1.12x on the funded amount), not an annual interest rate
- Approval and funding can happen same-day
- Cash flow and revenue carry more weight than credit score
- No fixed end date — payoff speed depends on your payment cadence
Our MCA rates start at 12%. If speed and flexibility are the priority, an MCA is usually the right call.
3. What’s a Term Loan?
A term loan is a fixed amount of capital repaid over a set period — monthly, biweekly, or weekly — at a defined interest rate with a defined end date.
Key characteristics:
- Fixed repayment schedule from day one, no variability
- Cost expressed as an annual interest rate
- Slightly longer to underwrite than an MCA
- Better suited for businesses with consistent, predictable cash flow
- Lower total cost of capital at equivalent amounts
Our term loan rates start at 6%, making them the most cost-effective product we offer for businesses that qualify.
4. Side by side
| Feature | MCA | Term Loan |
|---|---|---|
| Repayment type | Fixed daily or weekly draw | Fixed payment, set schedule |
| Pricing | from 12% | from 6% |
| Approval speed | Hours | 24–48 hours |
| Credit sensitivity | Low | Moderate |
| Best total cost | Typically higher | Typically lower |
| Best for | Short-term gaps, fast needs | Planned capital, lower total cost |
5. How to decide
Choose an MCA if:
- You need capital within 24 hours
- Your revenue varies month to month and you want repayment to flex with it
- Your credit profile has complications
- The use of funds is short-term — inventory, a gap in receivables, a time-sensitive opportunity
Choose a term loan if:
- Minimizing total cost of capital is the priority
- Your cash flow is predictable enough to support a fixed payment
- You’re planning ahead rather than reacting to something immediate
- You want a known payoff date from the start
A lot of businesses use both at different points. The right product depends on timing, what the capital is for, and where your financials are right now. If you’re not sure which fits, our underwriting team will walk you through both options before anything gets signed.
6. One thing both have in common
Neither product carries a prepayment penalty with us. Both come with early payoff discounts: 12% off the balance if you pay within 30 days, 8% at 60 days, 5% at 90 days. That structure tends to surprise people. It shouldn’t be surprising — it’s just how lending should work.