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What are the Key Differences Between a Merchant Cash Advance and a Business Loan?

As a Merchant Cash Advance (MCA) provider, we’re often asked about the fine differences between our products and business loans. While both of these financial products can be beneficial options for small business owners, there are some key characteristics that set them apart.

Business Loans

Business loans are a great option for starting up a brand new business. They can also be used to supplement cash flow or cover large purchases, such as new equipment, assets, etc. Loans are a tried and true form of business funding. Many businesses think of loans as the most traditional financial option, and they are a highly sought-out product in part because of that notion.

The cost of funds is generally lower for business loans, but the qualifications tend to be much stricter. Loans are often provided by financial institutions that are risk-averse and unable to lend money to companies with a history of bad credit or financial difficulties. The acceptance rate for business loans (from big banks) was around 13% in 2020.

In most cases, you’ll likely need to supply upwards of 20 documents before being approved or disapproved. The application process tends to be rigorous and intense. And, if you are approved, you typically don’t see the funds hit your account until weeks or months later.

Even with this in mind, loans are still a fantastic fit for many business owners, and they have proven to be a reliable and steady source of financing throughout the years.

Merchant Cash Advance (MCA)

Overall, the MCA is a much newer financial product for small businesses, but it is growing in popularity. When you take out an MCA, you are simply gaining access to your future sales early by selling a percentage of your future sales to the advance company. MCAs are exclusively used to supplement cash flow or make large purchases, such as new equipment, assets, etc. It is not intended to be used to start up a brand new business.

One defining feature of the MCA is its flexibility to work with business owners from a variety of financial backgrounds— whether they have great credit or bad credit. At Elevate Funding, we don’t even check your credit score, as it is not a factor we use to determine whether or not you can make your payments.

MCA repayment is also quite flexible. Payments are based on a business’s projected sales rather than a fixed dollar amount. That means when your sales drop, we adjust your payment amounts to be lower.

When you take out an MCA with us, you sign a Future Receivables Sales Agreement (FRSA). This agreement states that your sales performance will be re-evaluated on a regular basis to ensure your daily payment amount is in line with the agreed-upon payment percentage. We even offer a self-service feature, allowing business owners to expedite this review process all on their own. More on this in our recent press release.

One final key advantage to MCA is the ease of access to your funds. We can fund businesses in as little as 24 hours, and we wire those funds directly into your bank account.

Not sure whether a loan or an MCA is right for your business? Let’s chat! We understand that each business has its own unique history and set of needs, and our products are not necessarily the right choice for every business owner. Our main goal is simply to support small businesses. We’re always here to offer guidance and help you understand which product will work best for your needs at this time.

If you wish to speak to someone now, please call us at 888-382-3945 or fill out the form on our contact page to send us an inquiry. One of our teammates will get back to you as soon as they are available.


Revenue-Based Finance is formerly and alternatively known as Merchant Cash Advance, or MCA.