By Anthony Collin, CEO, Smart Business Funding. $500M+ funded since 2014. Updated October 2026.
The short answer: a merchant cash advance (MCA) gives you one lump sum with a fixed total payback and a fixed daily or weekly payment. A business line of credit gives you a pool of funds you draw from when you need it, and you pay interest only on what you draw. Choose an MCA for a single, known need or when speed and approval flexibility matter most. Choose a line of credit for ongoing, unpredictable costs.
Side by side: MCA vs. line of credit
| Merchant cash advance | Business line of credit | |
|---|---|---|
| Structure | One lump sum. Not a loan. | Revolving credit limit you draw from |
| How you pay | Fixed daily or weekly payment | Regular payments on each draw |
| How cost works | A factor rate and fees, set once up front. Total payback is known before you accept. | Interest on each draw, only on what you borrow, plus any partner fees |
| Typical term | Up to 10 months, sometimes up to 15 | Up to 12 months through our line of credit partners |
| Speed | Offers usually in 1 to 5 hours on a complete file. Funding usually in 24 to 48 hours. | Funding within 24 to 48 hours through our partners |
| Reuse | After 50% to 70% is paid back and your account is in good standing, you may qualify for a renewal | Funds become available again as you repay |
| Best for | A specific need now: inventory, equipment, payroll gap, seasonal push | Recurring or uncertain costs and short cash flow gaps |
How a merchant cash advance works
You receive a lump sum and agree to a fixed total payback, set by a factor rate. Payments are a fixed amount, daily or weekly, until the total is repaid. Because there is no variable balance, you know the full cost on day one. Our in-house Direct Fund program uses factor rates of 1.25 to 1.49 for prime files and 1.309 to 1.499 for higher-risk files, with fees of 5% to 10%. You can see the structure on our Transparent Terms page, and learn the mechanics on our merchant cash advance page.
Eligibility is at least 1 year in business and at least $5,000 in monthly revenue (our in-house program looks for about $50,000 a month). We use a soft pull only, with a minimum credit score of 500. No collateral is required for the Direct MCA.
How a business line of credit works
A line of credit sets a limit. You draw what you need, when you need it, and pay interest only on the amount you actually borrow. As you repay, that room opens up again. We offer lines of credit through specialized partners, with terms up to 12 months and funding within 24 to 48 hours. Details are on our lines of credit page. Approval standards, limits and pricing are set by the partner and depend on your business, so we confirm them with you before you sign anything.
A worked example: $50,000
Merchant cash advance. Funding amount $50,000, factor rate 1.35, term 10 months.
- Total payback: $50,000 x 1.35 = $67,500
- Cost of funding: $67,500 minus $50,000 = $17,500
- Fixed daily payment (about 21 business days a month, 210 payments): $321.43
Line of credit. The cost depends on what you draw and for how long, so a single number would mislead. As a simple illustration only, not a quote: if you drew $20,000 from a $50,000 line and the draw cost 1.5% per month on the balance for 3 months, interest would be about $900. Leave the rest of the line untouched and you pay nothing on it. Real pricing is set by the partner and varies by business.
The lesson: an MCA is priced as one total you know up front, while a line of credit is priced by usage. Neither is cheaper in every case. For a fair side by side, use our MCA cost calculator, read factor rate vs. APR, or try the funding calculator. Your actual offer is the only figure that counts.
When a merchant cash advance fits
- You have one specific, known need, such as a bulk inventory order, a piece of equipment or a seasonal ramp up.
- You want a fixed payment and a total repayment amount you know before you accept.
- You need an answer quickly and your credit profile is below what a bank line usually asks for.
- You would rather have a defined end date than an open-ended balance.
When a line of credit fits
- Your costs come in waves, such as uneven payroll timing or recurring supplier invoices.
- You want funds on standby and prefer to pay interest only when you use them.
- You expect to borrow small amounts repeatedly over the year.
- You want to keep the available room as a safety net.
Can a business use both?
Yes. Some owners use a line of credit as a standing cushion for small, recurring gaps and an MCA for a larger one time opportunity. Check each agreement for any limits on additional financing, and tell us what you already have so we can structure around it. A fixed MCA payment is easy to plan into your cash flow alongside the interest due on a line.
Frequently asked questions
Is a merchant cash advance a loan?
No. An MCA is the purchase of a portion of your future receipts at a discount, repaid with fixed daily or weekly payments, so it is priced with a factor rate and not an interest rate.
Which is faster, an MCA or a line of credit?
Both can fund quickly through us. For an MCA, offers usually arrive in 1 to 5 hours on a complete file and funding usually takes 24 to 48 hours. Our line of credit partners fund within 24 to 48 hours.
Which costs less?
It depends on how much you draw, for how long, and your offer. A line of credit can cost less when you use a small part of it for a short time. An MCA gives a fixed, known total. Compare actual offers in dollars.
What credit score do I need?
For our Direct MCA the minimum credit score is 500, with a soft pull only. Line of credit approval standards are set by our partners.
Can I renew an MCA?
Once you have paid back 50% to 70% and your account is in good standing, you may qualify for a renewal.
How much can I get?
Funding runs from $10,000 up to $5,000,000, depending on your business. You need at least 1 year in business and at least $5,000 in monthly revenue.
Not sure which fits? Let us run the numbers.
Offers in 1 to 5 hours on a complete file, funding in 24 to 48 hours, from $10,000 to $5,000,000. No cost to apply, no obligation, soft pull only.
This article is general information, not legal, tax or financial advice. Funding is subject to underwriting and approval. Amounts, pricing, fees and timing vary by applicant. Line of credit products are provided by partners.
