Merchant cash advance vs business loan: which is better?

Quick answer: a business loan is usually cheaper and better for planned, longer-term needs if you can afford fixed monthly repayments. A merchant cash advance (MCA) is usually more expensive but can be quicker to arrange, easier to qualify for, and its repayments flex with your card sales. That makes it worth considering for card-taking businesses with uneven trade or limited credit history.

Side-by-side comparison

	Business loan	Merchant cash advance
How you repay	Fixed monthly instalments	A percentage of daily card sales
How cost is shown	Interest rate (and any fees)	Fixed fee, often a factor rate such as 1.2
Term	Fixed, often 1 to 5 years for unsecured loans	No fixed term; ends when the agreed total is repaid
Typical speed	Days to a few weeks	Often a few days
Main eligibility focus	Trading history, accounts, affordability, credit	Steady card takings
Security	Unsecured or secured; personal guarantees are common	Usually no property security
FCA regulated?	Lending to limited companies is mostly unregulated; some smaller loans to sole traders and partnerships are regulated	Usually not regulated

When a business loan is usually the better choice

• You need funding for growth, equipment, refurbishment or acquisition over a longer period
• Your accounts show steady profits and you can comfortably afford fixed repayments
• You want the lowest total cost

When a merchant cash advance can make sense

• Most of your sales are by card and your trade is seasonal or uneven
• You need funds quickly, for example for stock before a busy season
• Your business is younger or your credit history would limit loan options

Questions to ask before deciding

1. What is the total amount I will repay in pounds, and over roughly how long?
2. Can I afford the repayments in my quietest month?
3. Are there early repayment savings or charges?
4. Is a personal guarantee required?

Get both options compared

As a broker, Bridgemead Finance can look at loans and merchant cash advances side by side for your business so you can compare the real costs. Read how a merchant cash advance works, see our business loans page, or tell us what you need.