Invoice factoring advances cash against unpaid B2B invoices, is repaid when your customers pay, and is priced on their credit — typically 1-4% per 30 days (roughly 15-50% APR). A merchant cash advance is a lump sum repaid from a daily slice of your future card or bank sales, priced on your deposits — a 1.15-1.50 factor rate (40-100%+ effective APR). If you invoice creditworthy businesses, factoring is almost always the cheaper choice. MCA fits B2C, card-based revenue with no receivables to sell.
Invoice factoring and merchant cash advances are both fast ways to turn future money into cash today, but they work differently and cost very differently. The right choice depends mostly on one question: do you have unpaid B2B invoices, or is your revenue card sales? This page compares the two side by side — pricing, cost, qualification, and speed — so you can pick the cheaper fit. For the underlying rates, see invoice factoring rates and merchant cash advance rates 2026.
Side-by-Side Comparison
| Factor | Invoice Factoring | Merchant Cash Advance |
|---|---|---|
| What you sell | Unpaid B2B invoices | A share of future sales |
| Pricing | 1-4% per 30 days (≈15-50% APR) | 1.15-1.50 factor (≈40-100%+ APR) |
| Priced on | Your customers' credit | Your card/bank deposit volume |
| Repayment | When your customer pays the invoice | Daily holdback of 10-20% of sales |
| Advance amount | 80-95% of invoice value | Lump sum vs future sales |
| Best for | B2B with slow-paying invoices | B2C / retail with card sales |
| Credit requirement | Low (customer credit matters) | Low (revenue matters) |
| Speed to fund | Setup days; then same/next-day | 1-2 business days |
Which Costs More
In almost every head-to-head where both are available, invoice factoring is cheaper. Factoring at 2% per 30 days on an invoice that pays in 45 days costs roughly 3% of face value — an annualized cost in the 20-30% range. The same cash from an MCA at a 1.30 factor over six months runs closer to 80-90% effective APR. The reason factoring is cheaper is structural: the factor is repaid by your (often more creditworthy) customers and holds the invoice as collateral, so it carries less risk than an MCA repaid from your own future sales. Convert both to APR before deciding — see the cost math in MCA rates 2026.
When to Use Each
Choose invoice factoring when
- You invoice other businesses or government agencies and wait 30-90 days to get paid.
- Your customers have solid credit, even if yours doesn't.
- Slow receivables — not a one-time lump-sum need — are the real cash-flow problem.
Choose a merchant cash advance when
- Your revenue is card or daily bank sales (retail, restaurant, e-commerce) with no B2B invoices to sell.
- You need a lump sum fast and have exhausted cheaper options like a working capital loan or line of credit.
- You understand and accept the high effective APR for the speed.
Next Step
Get matched with lenders for whichever option is cheaper for your business — factoring if you have receivables, or the lowest-cost advance if you don't. Get matched with lenders.