Which Is Better? MCAs or Bank Loans?

Whether you’re updating your business, embarking on a new project, or looking for extra money for some other reason, you might be considering heading to the bank to apply for a loan. However, merchant cash advances, otherwise known as MCAs, are another viable option for businesses that need an immediate financial boost. Here is a quick comparison of MCAs and bank loans.

Your Credit

If your business has poor credit, a merchant cash advance might be the best option for you. Merchant cash advances are unsecured loans, but they have a reputation for easy approval. The loan could even help you build your credit so you can get even better deals when you borrow money in the future.

The Repayment Method

With a regular bank loan, you have to pay a fixed amount every month regardless of how your business performed. This is convenient because you know exactly when you’ll finish paying off the loan. However, it can also be a burden during those months when your business didn’t meet its sales goals.

With a merchant cash advance, a percentage of your debit and credit card sales automatically goes to the loan repayment. You don’t have to worry about consciously setting aside money for the payment since it’s being done for you. It’s one less thing for a busy business owner like you to fret about!


Sometimes, bank loans require that you offer a form of collateral. You might have to use some of your business’s vehicles or a piece of property. Depending on the type of business you own, your own home could even end up being the collateral. If you default on the loan, the personal consequences could be disastrous.

MCAs are unsecured loans; you don’t need to provide any collateral. There is no risk that you’ll lose important business or personal assets.

The Final Payoff Amount

With bank loans, how much you ultimately pay depends on how long it takes you to pay off the loan. You might feel pressured to pay it off early so you save money on interest.

On the other hand, when you choose a merchant cash advance, you know exactly how much you’re going to be paying over the life of the loan. There is no guesswork with APRs or early payoffs. This can simplify your finances since you’ll be letting your credit and debit sales take over your payment responsibilities.

MCAs are not the perfect solution for every business, but they do offer advantages that traditional bank loans lack.

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