Head to head
Merchant cash advance vs Business line of credit
Both are marketed for short-term cash flow gaps. One accrues interest on what you draw; the other fixes a total repayment the moment you sign. That difference decides almost everything else.
| Merchant cash advance | Business line of credit | |
|---|---|---|
| Typical amount | $5,000 to $500,000 | $10,000 to $5 million |
| Cost | Commonly 40%-350% APR equivalent | Prime + 1% to 25%+ APR, by lender type |
| Time to funding | Same day to 3 days | Same day to 4 weeks |
| Term | 3-18 months, variable by revenue | Revolving, renewed annually |
| Relative expense | $$$$$$ | $$$ |
Cost bands are editorial judgements expressed in APR-equivalent terms so products quoting factor rates and discount fees can be compared with products quoting interest. They indicate relative expense, not quotes. Methodology.
Merchant cash advance
High costUsually chosen when
- No line is available and the need is immediate
- Card revenue is strong but the credit file is not
Business line of credit
Usually chosen when
- The need recurs, so a facility to draw on beats a one-time lump
- You want to pay interest only on what is outstanding
- Repaying early should reduce what you owe, which it does on a line and generally does not on an advance
Common questions
- Is a fintech line of credit the same as a bank line?
- Structurally similar, priced very differently. Bank lines are typically prime plus a spread; fintech lines can reach the mid-double digits in APR terms, often with weekly repayment. Compare the APR, not the product name.
Other comparisons
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