A merchant cash advance (MCA) is the fastest and most flexible to qualify for but the most expensive, a term loan is the cheapest and most predictable but the slowest and hardest to qualify for, and a line of credit sits in the middle — offering reusable, draw-as-needed funding. The right choice depends on how quickly you need the money, how strong your credit and financials are, and whether you need a one-time lump sum or ongoing access to capital. Below we break all three down side by side with real numbers so you can see the true trade-offs.
Key takeaways
- All three products commonly start at $10,000 in funding.
- MCAs and other revenue-based products can approve FICO scores of 500+ when revenue is steady.
- MCA approval is based on sales and bank deposits, not primarily credit.
- MCA funding can arrive the same day to within 48 hours.
- MCAs are priced with a factor rate (e.g. 1.25–1.45); loans and lines use APR.
- A factor rate is fixed — paying an MCA off early usually doesn't lower the total owed.
- A line of credit is revolving and charges interest only on the amount drawn.
- Term loans offer the lowest cost but the slowest, strictest approval.
- Reverse consolidation can lower the total daily payment on existing advances.
Quick side-by-side comparison
Each product solves a different problem. An MCA advances you a lump sum against future sales, a term loan gives you a fixed amount repaid over a set schedule, and a line of credit is a revolving limit you draw from and repay repeatedly. Here is how they compare on the factors that matter most.
| Factor | Merchant Cash Advance | Term Loan | Line of Credit |
|---|---|---|---|
| Funding amount | From $10,000 | From $10,000 | From $10,000 |
| Minimum FICO | 500+ | 650+ typical | 600+ typical |
| Approval based on | Sales / bank deposits | Credit, time in business, financials | Revenue and credit |
| Speed to funding | Same day to 48 hours | Several days to weeks | 1 to 5 business days |
| Cost measured in | Factor rate (e.g. 1.25–1.45) | APR (e.g. 8%–35%) | APR on drawn balance |
| Repayment | Daily/weekly % of sales | Fixed monthly payment | Pay only what you draw |
| Reusable? | No | No | Yes |
How each product is priced (factor rate vs APR)
The biggest source of confusion is cost, because these products aren't quoted the same way. A term loan and a line of credit use an APR — an annualized percentage that accounts for time. An MCA uses a factor rate, a flat multiplier applied once to the amount advanced, regardless of how quickly you repay.
Say you take $50,000 under each structure:
| Product | Rate | Total repaid | Cost of capital |
|---|---|---|---|
| MCA | 1.35 factor rate | $67,500 | $17,500 |
| Term loan (2 yr) | 18% APR | ~$59,900 | ~$9,900 |
| Line of credit (drawn 6 mo) | 24% APR | ~$53,600 | ~$3,600 |
Two things to note. First, a factor rate is fixed: paying an MCA off early usually does not reduce the total owed, so its effective APR can be very high on short repayment windows. Second, a line of credit only charges interest on what you actually draw, so if you leave part of the limit untouched it can be the cheapest option of all.
Speed and qualification: who gets approved
The order of difficulty is consistent across the industry. MCAs and other revenue-based products are the easiest to qualify for because approval leans on your sales and bank deposits rather than your credit score — many businesses with a FICO around 500 and steady revenue can qualify, often with funding the same day or within 48 hours.
- Merchant cash advance: Approval driven by consistent deposits. Light documentation (often just 3–6 months of bank statements). Fastest path to cash.
- Line of credit: Needs decent revenue and usually a mid-600s score. Funding in a few business days once approved; the line then stays open for future draws.
- Term loan: Strictest. Lenders weigh credit history, time in business, and financial statements, and underwriting takes longer — but you're rewarded with the lowest cost.
Repayment structure and cash-flow impact
How you repay matters as much as the headline rate, because it determines the strain on your day-to-day cash flow.
- MCA: Repaid as a fixed percentage of daily or weekly sales (a "holdback"). Payments flex with revenue — smaller on slow days, larger on strong ones — which protects cash flow in a downturn but makes budgeting less predictable.
- Term loan: A fixed amount every month for the life of the loan. Highly predictable, easy to plan around, but the payment is due whether sales are up or down.
- Line of credit: You pay only on the balance you've drawn, and as you repay, the credit frees back up for reuse. This makes it ideal for recurring or unpredictable expenses.
When each option makes the most sense
Match the product to the job:
- Choose an MCA when you need cash urgently, your credit is below bank thresholds, and you have strong daily sales to support the repayment — for example covering a sudden inventory or payroll gap.
- Choose a term loan for a large, one-time, planned investment — an expansion, equipment, or a buildout — where the lowest possible cost and predictable payments matter more than speed.
- Choose a line of credit for ongoing or seasonal working-capital swings where you want a safety net you can tap repeatedly and only pay for when you use it.
If your business already carries one or more advances and the daily payments are squeezing cash flow, a reverse-consolidation structure can lower the total daily payment by restructuring how those obligations are serviced — freeing up working capital without changing the underlying agreements.
Frequently asked questions
Which is cheapest — MCA, term loan, or line of credit?
A term loan is typically the cheapest for a large one-time need because of its lower APR, while a line of credit can be cheapest overall when you only draw part of the limit since you pay interest only on what you use. An MCA is almost always the most expensive because its factor rate is a fixed multiplier that doesn't shrink if you repay early.
What credit score do I need for each?
Revenue-based products like an MCA can approve businesses with a FICO around 500+ because they weigh sales and deposits more than credit. A line of credit usually wants a mid-600s score, and a term loan typically expects 650+ along with solid time in business and financials.
How is a factor rate different from an APR?
A factor rate is a flat one-time multiplier — a 1.35 factor rate on $50,000 means you repay $67,500 no matter how fast you pay it back. An APR is annualized and accounts for time, so paying down the balance faster on a loan or line of credit reduces what you owe.
Which funds the fastest?
An MCA is the fastest, often funding the same day or within 48 hours because approval rests mainly on bank deposits and requires light documentation. A line of credit usually takes one to five business days, and a term loan can take several days to a few weeks.
Can I reuse the funds after I repay?
Only a line of credit is revolving — as you repay the drawn balance, that credit becomes available to use again. An MCA and a term loan are both one-time lump sums; to get more you'd apply again.
How much can I borrow with each?
All three commonly start from $10,000. The upper limit depends on your revenue, credit, and time in business, with term loans and lines of credit generally scaling higher for well-qualified businesses and MCAs sized to your monthly sales volume.
I already have an advance and payments are tight — what are my options?
A reverse-consolidation structure can lower your total daily payment by restructuring how your existing advances are serviced, which frees up working capital. It focuses on reducing the daily cash-flow strain rather than eliminating the underlying agreements.
