Head to head
Revenue-based financing vs Merchant cash advance
The mechanics rhyme: a multiple, a revenue share, no fixed maturity. The differences are in degree, and they are large enough to matter.
| Revenue-based financing | Merchant cash advance | |
|---|---|---|
| Typical amount | $10,000 to $5 million | $5,000 to $500,000 |
| Cost | Typically 1.15×-1.5× of the amount advanced | Commonly 40%-350% APR equivalent |
| Time to funding | 1 day to 2 weeks | Same day to 3 days |
| Term | 6-36 months, revenue-dependent | 3-18 months, variable by revenue |
| 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.
Revenue-based financing
High costUsually chosen when
- Recurring revenue is predictable, which is what these lenders underwrite
- You want months rather than weeks to repay
- Underwriting on live platform data suits you better than a credit file
Merchant cash advance
High costUsually chosen when
- Revenue is card-based and irregular
- Nothing else will fund in the time available
Common questions
- Is revenue-based financing dilutive?
- No equity changes hands. It is generally cheaper than equity for a business that keeps growing, and more expensive than a bank loan for one that qualifies for a bank loan.
Other comparisons
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