Head to head
Merchant cash advance vs SBA 7(a) loan
These sit at opposite ends of the cost ladder, and businesses compare them because one can fund this week and the other cannot. It is worth seeing the size of the gap before treating them as alternatives.
| Merchant cash advance | SBA 7(a) loan | |
|---|---|---|
| Typical amount | $5,000 to $500,000 | Up to $5 million |
| Cost | Commonly 40%-350% APR equivalent | Prime + 3% to prime + 6.5%, by loan size |
| Time to funding | Same day to 3 days | 30-90 days |
| Term | 3-18 months, variable by revenue | Up to 10 years, 25 with real estate |
| 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
- The money is needed in days and no cheaper source can move that fast
- The use of funds returns more than the advance costs, over a shorter period than the repayment term
- The business cannot meet any bank's credit standard today
SBA 7(a) loan
Usually chosen when
- There is time to wait 30 to 90 days
- The amount is significant enough that the cost difference is measured in tens of thousands
- The need is structural rather than a genuine short-term gap
Common questions
- Why would anyone take an advance over an SBA loan?
- Timing and eligibility. An SBA loan the business cannot get, or cannot wait for, is not an option. Where both are genuinely available, the cost gap is very large.
- Can I refinance an advance into an SBA loan later?
- Sometimes. SBA rules allow refinancing certain existing business debt where it benefits the borrower, and high-cost short-term debt is often the clearest case. Talk to a lender about whether your specific facility qualifies.
Other comparisons
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