Price shapes
Merchant cash advance vs business loan
One is a fixed fee repaid from your card takings. The other is an interest rate on a schedule. Quoted side by side they cannot be compared, because they are not in the same units. In dollars over the same window, they can.
A merchant cash advance and an unsecured business loan usually land on the same desk for the same reason: money is needed and there is no property to pledge. From there they part ways completely. The advance fixes its total cost on day one and repays itself out of your card settlements. The loan charges interest on a falling balance against a fixed schedule.
If you have an advance offer in front of you today, the trap is comparing its factor rate to a loan's interest rate. Those are different units, and the comparison means nothing until both offers are converted into total dollars over the same period. That conversion is what this page is for.
The options
What each one actually is
-
Merchant cash advance
A lump sum now, with the total repayable fixed on day one by a factor rate, repaid automatically as a share of your daily card settlements. No fixed end date: your takings set the pace.
- Suits
- Card-heavy trade with genuinely volatile takings, where a fixed repayment is a real default risk rather than a theoretical one.
- Watch out for
- Repaying faster does not reduce the total, and per dollar borrowed an advance is generally the dearest option we arrange: more risk held by the provider, for less time, priced accordingly.
-
Unsecured business loan
A lump sum with an interest rate on a falling balance, a fixed schedule and a fixed term. You know the repayment and the end date from the start.
- Suits
- A known, one-off cost with a clear payback, where the business can meet a schedule through its quiet months as well as its good ones.
- Watch out for
- The schedule does not flex with a quiet month, and early-repayment treatment varies by lender: some facilities reward paying out early, some do not.
At a glance
Side by side
| Merchant cash advance | Unsecured business loan | |
|---|---|---|
| How it is priced | A fixed fee, set by a factor rate | An interest rate on a falling balance |
| Total cost fixed at the outset | Yes, before your first repayment | No. It depends on the term and any early payout |
| What repayments track | Your card settlements | A fixed schedule |
| Term | No fixed end date | Fixed and agreed upfront |
| What is assessed | Card turnover history | Trading history and revenue |
| Reusable once repaid | No | No |
| How to compare offers | Total repayable in dollars over your realistic window | Total repayments in dollars over the same window |
How to actually choose
The honest answer
The decision method fits in four steps. One: get the advance's total repayable, in dollars and in writing, fees included. Two: subtract the advance from it, and what is left is the cost of the money. Three: estimate your repayment window from your own card takings, not the provider's estimate. Four: ask the loan side for its total repayments over that same window. Fewer dollars over the same period is cheaper, and no other comparison between these two products is trustworthy.
Then apply the two honest overrides. Flexibility is genuinely worth a premium when a fixed repayment is a real default risk: a venue whose trade moves with the seasons is not being irrational by paying more for repayments that flex. And buying flexibility you will not use is the most common mistake on this product: if the cost is known and the payback is clear, you are buying money, not flexibility, and the loan usually does the same job for less.
For the full at-the-counter version of the method, including what to do if a provider will not put the total in writing, see the merchant cash advance page. Whichever way the numbers land, they are your numbers to decide on: we arrange both products and will show you each priced against the other.
FAQs
Common questions
Is a merchant cash advance a loan?
Structurally, usually not: an advance is typically documented as a purchase of your future takings, while a loan is a credit contract. As the person repaying it, the distinction matters less than the price shape it produces: a fixed total set on day one instead of interest on a falling balance. Compare the two in total dollars over the same window and the legal wrapper takes care of itself.
Which is cheaper, an advance or a business loan?
Per dollar borrowed, the advance is generally the dearer of the two, for a structural reason: the provider holds more risk, without asset security and with repayments that slow when your trade does, and prices for it. The only comparison worth trusting on your own offers is total dollars repaid over the same window, which is the four-step method above.
Why does repaying an advance early not save money?
Because the factor rate fixes the total repayable on day one. The share of takings the provider collects sets how fast you repay, not how much. Busy trade clears the advance sooner without making it cheaper. Some providers offer an early-clearance discount: ask for it in writing before you sign, and treat a vague answer as your answer.
Can I refinance a merchant cash advance with a business loan?
Sometimes. Lenders assess it on the whole file: your trading, your other commitments and why the advance is there. One advance being replaced by a cheaper structure at the right moment is a normal conversation. If you are stacking advances to service each other, the honest conversation is business debt consolidation, not another facility on top.
The right answer depends on your numbers.
A comparison page can show you the shape of the decision. Which option is actually cheaper for your business depends on what the lenders would offer you, and that is the part we do.
An enquiry is a conversation, not an application. We won't submit anything to a lender without your say-so.