Equipment Financing vs. MCA: Compare Business Funding
Equipment financing vs. MCA — why equipment financing is almost always the right choice for purchasing business assets.
Equipment Financing: Equipment financing uses the purchased equipment as collateral, making it one of the most accessible forms of business funding for asset-heavy industries. Merchant Cash Advance: A merchant cash advance delivers a lump-sum advance against your future credit card or daily revenue, repaid as a fixed percentage of daily sales.
Equipment Financing vs. Merchant Cash Advance — side by side
| Equipment Financing | Merchant Cash Advance | |
|---|---|---|
| Typical amount | $5,000 – $5,000,000 | $5,000 – $500,000 |
| Typical term | 2 – 7 years | 3 – 18 months |
| Rate | 6% – 24% APR | 1.10 – 1.50 factor rate |
| Minimum time in business | 1 year | 6 months |
| Minimum credit score | 600+ | 500+ |
Which is right for your business?
- Equipment Financing tends to fit best when you need machinery or vehicles.
- Merchant Cash Advance tends to fit best when you need inventory purchases or payroll gaps.
Frequently asked questions
Can I use an MCA to buy equipment?
Technically yes, but it is almost always the wrong choice. An MCA on $50,000 of equipment might cost $15,000–$25,000 in factor fees. Equipment financing on the same purchase would cost $3,000–$8,000 in interest over the loan term. Always use equipment financing for equipment.
