Merchant Cash AdvanceTerm LoansSBA LoansLine of CreditEquipment FinancingMore →

Industries We Serve

Get started →
← Back to Resources
Funding Comparison Guide

MCA vs. Line of Credit

Both put capital in your account fast — but an MCA can cost 3–5× more than a line of credit for the same amount. The difference comes down to how each product is priced and whether you can qualify.

Merchant Cash Advance

Factor rate, daily ACH repayment

An advance against your future revenue. You receive a lump sum and repay it — plus a fixed fee — via automatic daily or weekly ACH draws. No fixed term, but most MCAs are repaid within 4–18 months.

No minimum credit score requirement (500+)
Approval based primarily on revenue, not credit
Funds in 24–48 hours — sometimes same day
No collateral — UCC blanket lien only
Factor rate: 1.10–1.49×Amounts: $5K – $500KTypical term: 4–18 months
See MCA options

Line of Credit

Revolving, interest only on what you use

A credit limit you draw from, repay, and draw again — as many times as you need. You only pay interest on what you've pulled out. Prepaying saves money immediately, and repaid amounts restore your available balance.

Pay interest only on outstanding balance
Reuse repaid funds without reapplying
Prepay anytime and save on interest
Effective APR typically 8–25%
Typical APR: Prime + 1.5–9%Amounts: $10K – $500KTerm: 6 mo – 3 yrs, renewable
See LOC options

True Cost Calculator

Factor rates don't look scary until you convert them to APR. Enter your numbers to see the real cost difference between an MCA and a LOC for your situation.

Shared Parameters

$

MCA

Line of Credit

MCA Total Cost

$22,500

over repayment period

Total payback$97,500
Est. daily payment$580/day
Effective APR45%

LOC Total Cost

$8,100

at 70% utilization

Interest$7,350
Annual fee (~$750/yr)$750
Effective APR15.4%

The line of credit costs $14,400 less — typical when you can qualify.

The MCA effective APR is 45% vs 15.4% for the LOC. Reduce the factor rate or extend the LOC period to see how the gap changes.

Estimates only. LOC cost assumes constant utilization at 70% throughout the comparison period. MCA daily payment is based on 21 business days/month. Actual costs vary by lender.

Side-by-Side Comparison

Feature
MCA
Line of Credit
Structure
Advance repaid via daily/weekly ACH from business bank account
Revolving credit line — draw, repay, draw again up to your limit
Cost structure
Factor rate (1.10–1.49×) — not an APR
Interest rate (APR) only on the balance you draw
Effective APR
Often 40–150%+ depending on factor rate and repayment speed
Typically 8–25% (Prime + 1.5–9%)
Repayment
Automatic daily or weekly ACH — no manual payments
Flexible — minimum monthly payment or pay it off faster
Funding speed
24–48 hours from approval
1–5 days from approval; draws instant once open
Min. credit score
~500+ (revenue is the primary qualifier)
~620+
Revenue requirement
Typically $10K+/month, 3–6 months in business
Varies; often $5K–$10K+/month, 1+ year in business
Collateral
UCC blanket lien on business assets (no specific collateral)
Secured or unsecured — lender's choice
Reusable
No — must reapply for a new advance
Yes — repaid amounts restore your available credit immediately
Prepayment benefit
None — factor rate is fixed regardless of payoff speed (unless discounted)
Yes — pay off early and save on interest immediately
Credit reporting
Typically not reported to business credit bureaus
Reported — high utilization can affect your score
Stacking risk
High — lenders may not see existing MCAs on credit reports
Low — visible on credit reports, limiting stacking temptation

When to Use Each

In most cases, a line of credit is the better product — if you can qualify. MCA fills the gap when speed or credit profile makes a LOC inaccessible.

Use an MCA When

  • You need funding in under 48 hours
  • Your credit score is below 600
  • You've been in business less than 1 year
  • Your cash flow is inconsistent (percentage-based repayment fits better)
  • You were declined for traditional financing
  • The opportunity ROI clearly outweighs the factor rate cost

Use a Line of Credit When

  • You have a credit score of 620+ and 1+ year in business
  • You need ongoing access to capital — not a one-time injection
  • Minimizing cost of capital is the priority
  • You want to build business credit history
  • Your cash flow is predictable enough to service monthly payments
  • You plan to draw and repay multiple times

Common Questions

Related Guides & Tools

MCA OverviewLine of CreditMCA vs. Term LoanMCA vs. FactoringFactor Rate to APRLOC vs. Term LoanRevenue-Based FinancingInvoice FactoringLoan CalculatorAll Resources

Ready to explore your options?

Whether you qualify for a line of credit or need the speed of an MCA, we'll match you with the right lender for your situation.

Apply for an MCAApply for a Line of Credit