MCA vs. Business Line of Credit: Which Is Better for Working Capital?

Overview

If a business can qualify for a business line of credit, it should almost always take the line of credit over an MCA. The cost difference is not marginal — it is severe. An MCA at a 1.35 factor rate for 8 months equates to roughly 50–70% APR. A business line of credit costs 10–25% APR. On $100,000 in capital, the difference is $20,000–$40,000 in additional financing cost annually. The MCA exists to serve businesses that cannot qualify for traditional revolving credit: low credit scores (500–600), thin revenue history, or businesses whose revenue concentration (card swipes) is not recognized by bank underwriters. For these businesses, the MCA provides access to capital that would otherwise be unavailable — and if deployed into a revenue-generating investment, the return can justify the cost. The practical rule: pursue a line of credit first, every time. If declined, understand why and work on fixing the qualification gaps (credit, revenue, time in business). Use an MCA only when the need is urgent, the alternative is worse (missing payroll, losing inventory, forfeiting a contract), and you have a clear path to repayment. Businesses that use MCAs as a permanent working capital strategy — rolling into new MCAs when the old one is repaid — frequently end up in a debt cycle that is extremely difficult to exit. Lines of credit, by contrast, can remain open indefinitely and serve as permanent working capital facilities.

Restaurant with 620 FICO and $120K annual revenue needs $30K fast

Apply for line of credit first; MCA if declined 620 FICO may qualify for some online lines of credit. Exhaust line options before taking an MCA at 50–80% APR equivalent.

Established business with 720 FICO and $500K revenue needs working capital

Business Line of Credit This profile clearly qualifies for a bank or online line of credit at 10–20% APR. An MCA would be 3–5x more expensive for equivalent capital.

Frequently asked questions

Can I use a line of credit to pay off an MCA?

Yes — and this is one of the best uses of a business line of credit. If you have an MCA at a 1.35 factor rate still outstanding, securing a line of credit at 15% APR and paying off the MCA immediately can save thousands in remaining factor cost.

What credit score do I need for a business line of credit?

Online alternative lenders typically require 600+ FICO. Bank lines typically require 660+ FICO and 2+ years in business. SBA CAPLines (the SBA revolving credit product) require 680+ FICO and SBA eligibility.

Can I have both an MCA and a line of credit simultaneously?

Technically yes, but many line of credit lenders will see the MCA's UCC lien and reduce your available credit or decline due to existing senior secured debt. Prioritize establishing the line of credit before taking an MCA, not after.