Both put cash in your account—but they work very differently. A term loan is the lower-cost, structured choice; a merchant cash advance is the fast, accessible one. Here's an honest breakdown so you don't overpay.
A business term loan gives you a lump sum repaid in fixed installments at an interest rate—cheaper and more predictable, but it requires decent credit and a few days to fund. A merchant cash advance isn't a loan at all: it's an upfront sum in exchange for a slice of your future sales, repaid as a percentage of daily revenue. It funds fast and is easy to qualify for, but it costs more. If you can qualify for a term loan, it's usually the better deal. Use an advance when speed or access matters most.
| Feature | Business Term Loan | Merchant Cash Advance |
|---|---|---|
| What it is | A loan—lump sum + interest | Purchase of future sales (not a loan) |
| Cost basis | Interest rate / APR | Factor rate (typically higher effective cost) |
| Repayment | Fixed installments, set schedule | % of daily/weekly sales until paid |
| Speed to fund | 1-7 days | Same day - 2 days |
| Qualification | Stronger credit, more time in business | Based on sales volume; flexible on credit |
| Best for | Planned projects, lower cost | Urgent needs, weaker credit |
| Payment when sales slow | Unchanged (fixed) | Lower (flexes with revenue) |
| Overall cost | Lower | Higher |
You borrow a fixed amount and repay it in equal installments—weekly or monthly—over a set term, with an interest rate. The payment is the same regardless of how business is going, which makes budgeting easy and keeps the total cost lower. It's the better choice for a planned purchase or project when you can qualify. Learn more about business term loans.
A provider gives you cash upfront in exchange for a portion of your future sales, priced with a factor rate rather than an interest rate. You repay automatically as a percentage of daily or weekly revenue—so payments shrink on slow days and grow on busy ones. It's fast and accessible, but the effective cost is typically much higher than a term loan. Learn more about the merchant cash advance.
Decent credit and 1+ year in business? Take the lower cost and predictability.
A defined project or purchase where a fixed schedule fits your budget.
You want to minimize what the financing costs over its life.
You'd prefer to spread repayment over a year or more.
Same- or next-day funding when timing beats cost—see same-day business funding.
You can't qualify for a term loan—see bad credit business loans.
High card or daily revenue makes the percentage-of-sales model workable.
You want payments that ease off automatically during slow stretches.
Merchant cash advances are priced with factor rates, which can disguise a high effective cost—use the MCA cost calculator to convert a factor rate into a true APR before you sign—and frequent daily payments can strain cash flow. They're a valuable tool when used deliberately for speed or access, but if you qualify for a term loan, a line of credit, or working capital, compare those first. The goal is to match the tool to the need without overpaying. When in doubt, apply once and compare real offers side by side.
A term loan is a lump sum repaid in fixed installments at an interest rate. A merchant cash advance isn't a loan—it's an upfront sum for a portion of future sales, repaid as a percentage of daily revenue using a factor rate.
A term loan is almost always cheaper. An advance's factor rate can translate to a much higher effective cost—choose it for speed and access, not low cost.
A merchant cash advance—it focuses on sales volume over credit score, so low-credit or newer businesses can often qualify. See bad credit business loans.
You repay automatically as a fixed percentage of daily or weekly sales until the agreed amount is paid—less on slow days, more on busy ones.
When you need money very fast, have strong daily sales, and can't qualify for a term loan. If you can qualify and can wait a few days, the term loan usually costs far less.
Find My Best FitTell us your sales, credit, and timeline, and we'll show you the lowest-cost option you actually qualify for—whether that's a term loan, an advance, or something better. One application, real offers, no overpaying.