Guide № 2 · updated August 2026
MCA vs. term loan: the honest decision
One is fast and expensive. One is slower and cheaper. The right answer depends on exactly three things — and none of them is "how fast can I get the money."
The two products, honestly labeled
| Merchant cash advance | Term loan (online lender) | |
|---|---|---|
| Speed | 24–72 hours | 2–10 days |
| Typical true cost | 60–200% APR | 15–45% APR |
| Payments | Daily/weekly, hits cash flow hard | Monthly (some weekly) |
| Credit needed | Flexible (500s can work) | Usually 600–625+ |
| Time in business | 6+ months often OK | Usually 1–2+ years |
| Early payoff | Usually no savings | Usually saves interest |
The three questions that actually decide it
- What's the money for, and what does it earn? An advance can only make sense when the money produces a fast, high-margin return — inventory for a season you'll sell through in weeks, a contract deposit that unlocks revenue, an equipment fix that's stopping sales today. If the return on the money is below its cost (run the receipt), the "opportunity" is the funder's, not yours.
- Can your daily cash flow survive the payments? A $65,000 payback over 6 months is roughly $500 every business day. If your margins are thin or revenue is seasonal, daily withdrawals can starve payroll and inventory — the classic path to taking a second advance to survive the first (called "stacking," and it's how businesses die).
- Do you actually fail to qualify for the cheaper thing? This is the big one. Many owners take an advance because it was the first "yes" — not because it was the only one. If you have 1+ year in business, $100k+ annual revenue, and credit around 600–625+, you very likely have cheaper options, and 60 days of preparation (see what funders check) can move you a whole tier down in cost.
The verdict
The honest decision tree: Can it wait months? → SBA/bank. Can it wait ~a week and you qualify? → term loan or line of credit. Genuinely can't wait, return on the money clearly beats its cost, and cash flow survives the payments? → an advance can be a rational tool. Anything else → it's not a funding problem, it's a margin or timing problem, and more expensive money makes it worse.
If you do take an advance
- Get the APR in writing with all fees included (your state may require it — California does on many offers).
- Ask about prepayment discounts and reconciliation (the clause that adjusts payments if revenue drops — a real advance has one; its absence is a red flag regulators specifically look for).
- Never stack. A second advance on top of a first is the single most reliable predictor of default we know of.
- Compare at least two offers — factor rates for the same business routinely vary by 0.10–0.15 between funders, which is thousands of dollars.