MCA vs. Term Loan
They're priced two completely different ways, so comparing the rates head-to-head is a trap. Here's the honest dollar comparison and how to tell which one actually fits.
Term loan
Interest on a shrinking balance — pay early, save money. Usually the cheaper product.
Merchant cash advance
Flat factor rate, fixed payback, no early-pay discount on most contracts. Faster, costs more.
Two different ways to price money
A term loan charges interest on a shrinking balance. You borrow a sum, pay it back on a fixed schedule, and the interest stops accruing the moment the balance hits zero. Pay early and you save money.
A merchant cash advance — what we call revenue-based funding — isn't a loan at all. A funder buys a slice of your future revenue at a discount. The price is a factor rate, a flat multiplier that sets your total payback up front. It doesn't compound, and on most contracts it doesn't shrink if you pay early.
Side by side
What it is, priced how, and when each one wins — condensed to the four questions people actually ask.
- What it is: a loan with interest, vs. a purchase of future revenue (not a loan).
- Priced as: interest rate / APR, vs. a factor rate (e.g. 1.25–1.45).
- Pay early? saves interest, vs. usually no savings unless the contract offers a prepay discount.
- Best when: you qualify and can wait, vs. speed or access matters more than price.
See the full side-by-side table (credit bar, speed to fund, payment schedule)
| Term loan | Merchant cash advance (RBF) | |
|---|---|---|
| What it is | A loan with interest | A purchase of future revenue (not a loan) |
| Price shown as | Interest rate / APR | Factor rate (e.g. 1.25–1.45) |
| Typical cost | Lower | Higher — you pay for speed and access |
| Pay early? | Saves interest | Usually no savings unless the contract offers a prepay discount |
| Speed to fund | Days to weeks | As fast as one business day |
| Credit bar | Higher — seasoned revenue, decent credit | Lower — newer or thinner files can qualify |
| Payments | Fixed monthly | Daily or weekly, often flexing with revenue |
| Best when | You qualify and can wait | Speed or access matters more than price |
The same $50,000, both ways
Illustrative only, not an offer — but it shows the shape of the trade-off:
The advance costs roughly $9,800 more in this example. That gap is the price of speed and of qualifying today. Sometimes it's clearly worth it — a job you can't staff without the cash, inventory that turns fast, a receivable you're bridging to. Often it isn't, and waiting three weeks for the cheaper product is the better call. The honest answer depends on your numbers, not on which product a salesperson is paid more to push.
How to pick — a short decision guide
- Do you qualify for a term loan, and can you wait a few weeks? Take the term loan. The cost difference is real money.
- Do you need the cash in days, or would a bank decline you today? RBF exists for exactly this. Just size it so the payment doesn't choke operations.
- Will the money earn more than it costs? If $50,000 today produces more than the ~$17,500 an advance costs, the premium can pencil out. Run that honestly.
- Do you already have an advance out? Adding another is stacking, and it compounds cost fast. Look at consolidation before taking a new position.
See both options side by side
Answer a few questions and we'll show you what each product would actually cost you, in plain dollars, before we ask for anything else. Checking won't affect your personal credit.
Compare my optionsCommon questions
Is an MCA cheaper than a term loan?
Almost never on price alone. A term loan's interest stops when you repay; an advance's factor cost is fixed. You pay the advance premium for speed and access, not for a lower price.
Then why take an MCA at all?
Speed (days, not weeks), access (approval with thinner credit or less time in business), and payments that flex with revenue. If a term loan is within reach and you can wait, it's usually the better financial call.
Can I compare a factor rate to an interest rate?
Not directly — they measure different things. Convert both to total dollars paid back and the payment per period. Those share units and make the comparison fair.
What if I don't qualify for a term loan yet?
Then RBF may bridge you until you season into cheaper products. A good broker tells you what you'd need to qualify for the term loan next time, not just what you can get today.
Run your own numbers
Two minutes, one question at a time. You'll see the total in dollars before we ask who you are. Checking options won't affect your personal credit.
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