- MCA repayment
- Percentage of daily card sales
- Loan repayment
- Fixed instalments regardless of sales
- MCA suits
- Card-heavy retail and hospitality
- Loan suits
- Predictable-income businesses
How a merchant cash advance works
A funder advances a lump sum against future card takings, then automatically collects an agreed percentage of each day's card sales until the advance plus fee is repaid. Repayments flex with trading — busy days repay more, quiet days repay less — with no fixed monthly amount.
How a term business loan works
A business loan provides a lump sum repaid in fixed instalments over an agreed term, regardless of how trading performs day to day, calculated with a set interest rate and repayment schedule agreed upfront.
When each option wins
The right product depends heavily on your sales pattern and how much card revenue you take.
- MCA wins for card-heavy, seasonal businesses like retail, hospitality and salons
- Term loans win for businesses with steady, predictable income streams
- MCA wins when speed matters and card turnover history is strong
- Term loans win when the total cost needs to be fixed and known upfront
Cost comparison in practice
MCA pricing is usually quoted as a factor rate rather than an APR, which can make direct comparison difficult; over a typical repayment period it's often a more expensive form of funding than a term loan, but the flexible repayment can suit businesses with genuinely volatile trading.
Frequently asked
Is a merchant cash advance regulated like a loan?
No, MCAs generally fall outside consumer credit regulation since they're structured as a purchase of future receivables rather than a loan.
Can I get an MCA with a poor credit history?
Often yes, since funders weight card turnover more heavily than credit score, making it accessible where traditional loans might be declined.
Is MCA repayment really flexible if trading drops?
Yes, in principle repayments reduce with lower card sales, though most funders expect a minimum trading level to remain viable.
Which is cheaper for a strong-trading business?
A term loan is usually cheaper for businesses with predictable, strong trading that can comfortably manage fixed instalments.
Can I run an MCA alongside other finance?
Sometimes, but many funders require the MCA to be the primary or sole facility against card takings, so check for conflicts with existing invoice finance or loans.
Comparing MCA against a term loan?
Tell us your card turnover and trading pattern and we'll show you which route is genuinely cheaper for your business.
Related reading
Situations this applies to
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