MCA vs. Revenue-Based Financing: Compare Business Funding
MCA vs. revenue-based financing — both repay from revenue, but serve very different business models. Compare before you sign.
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. Revenue-Based Financing: Revenue-based financing provides capital in exchange for a fixed percentage of future monthly revenue until a set repayment cap is reached.
Merchant Cash Advance vs. Revenue-Based Financing — side by side
| Merchant Cash Advance | Revenue-Based Financing | |
|---|---|---|
| Typical amount | $5,000 – $500,000 | $25,000 – $1,000,000 |
| Typical term | 3 – 18 months | 6 – 36 months |
| Rate | 1.10 – 1.50 factor rate | 6% – 12% of monthly revenue |
| Minimum time in business | 6 months | 6 months |
| Minimum credit score | 500+ | 550+ |
Which is right for your business?
- Merchant Cash Advance tends to fit best when you need inventory purchases or payroll gaps.
- Revenue-Based Financing tends to fit best when you need saas growth or e-commerce inventory.
Frequently asked questions
Which is cheaper — MCA or RBF?
For businesses that qualify for both, RBF is almost always cheaper. MCA factor rates of 1.2–1.5x translate to very high effective APRs (50–200%+) on typical 6-month advances. RBF cap rates of 1.2–1.5x over 12–24 months produce a lower effective APR because the capital is outstanding longer.
Can I switch from an MCA to RBF?
Yes — many businesses start with an MCA for immediate capital access and transition to RBF as they build consistent recurring revenue. Paying off an MCA and replacing it with lower-cost RBF is a smart capital optimization move when the business profile supports it.
