Side by side
| Criterion | Unsecured business loan | Merchant cash advance |
|---|
| Repayment | Fixed monthly instalments | Percentage of daily card takings |
| Cost basis | Interest rate over the term | Factor rate applied to the advance |
| Typical annual cost | Lower for the same risk profile | Higher once annualised |
| Speed | Three days to three weeks | One to five days |
| Eligibility | Profitability and trading history | Card turnover volume |
| Behaviour in a quiet month | Payment stays the same | Payment falls with revenue |
Where the cash advance genuinely wins
For seasonal retail and hospitality the repayment mechanic is the product. When trade drops the payment drops with it, which removes the risk of a fixed instalment landing in a dead month. No conventional loan behaves that way.
It also reaches businesses a term lender will not touch, because underwriting looks at card processing history rather than accounts. For a young business with strong takings and thin filed figures, it is often the only offer on the table.
Where the term loan wins
On cost, almost always. A factor rate that looks modest converts into a high annual figure once the short repayment period is taken into account. If your business can service fixed payments, the loan is cheaper by a wide margin.
It is also better for anything with a payback period longer than a few months. Funding equipment or a refurbishment out of daily card deductions strangles cash flow just when you need it.
The renewal trap
Advances are commonly topped up before the previous one clears. Each renewal adds a new factor charge on a balance that has not fully repaid, and the effective cost compounds quietly. If you have renewed twice, the correct move is usually to refinance the whole position into a term facility rather than take a third.
The short answer
Take a term loan if your figures support one, because it costs less. Take a cash advance when revenue is genuinely volatile, the need is immediate and the payback is measured in months rather than years. Avoid rolling advances into each other.
Questions
Which is faster?
The advance, usually within a week and sometimes within a day where card processing data is already available.
Do either require security?
Neither takes property security, though both often ask for a personal guarantee.
Can I repay an advance early to save cost?
Often not. Many agreements charge the full factor regardless of timing, so check before assuming a saving.
Not sure which route fits? Describe the requirement once and we will structure it and approach the providers whose criteria match. No upfront fees — charges are due only once funding is in place.
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