Most small business funding comes down to two structures: a merchant cash advance, where you repay a percentage of revenue, and a term loan, where you repay a fixed amount on a schedule. Neither is better in the abstract. The right one depends on how predictable your revenue is and what you are funding.
The core difference
A merchant cash advance (MCA), also called revenue-based financing, is a purchase of a portion of your future sales. You receive a lump sum today and remit a fixed percentage of revenue, typically around 5%, until the agreed amount is repaid. A term loan is borrowed money repaid in equal installments over a set term, often one to five years, at a stated rate.
| Merchant cash advance | Term loan | |
|---|---|---|
| Repayment | % of revenue, flexes with sales | Fixed payment on a schedule |
| Typical term | 4 to 18 months | 1 to 5 years |
| Speed | Same day | Same day to a few days |
| Best for | Seasonal or variable revenue, short-term needs | Stable revenue, larger long-term investments |
| Credit emphasis | Low — revenue drives approval | Moderate — revenue plus credit profile |
| Cost | Factor rate (e.g. 1.2 = repay $1.20 per $1) | Interest rate, from prime for qualified businesses |
When an MCA makes sense
Choose revenue-based financing when your sales swing with the season, when you need the money within hours, or when the use is short-term: inventory for a holiday push, a repair that is stopping work, payroll before a large receivable lands. Because remittance drops when sales drop, a slow month does not put you behind.
When a term loan makes sense
Choose a term loan when revenue is steady and the investment pays back over years: a second location, a major equipment purchase, a practice expansion. The fixed payment is easy to budget and the longer term lowers the monthly burden.
How to compare cost honestly
Convert both to total dollars repaid over the real time you will hold the money. A 1.2 factor on $50,000 over eight months costs $10,000. A term loan at a given rate over three years may cost more in total dollars even if the monthly figure looks smaller. Then ask what the money earns: if $50,000 of inventory returns $80,000 in sales this season, the cost of either product is small next to the margin.
You do not have to decide alone
Belmont Capital Partners offers both, plus SBA loans and equipment financing. One application, and a specialist shows you the options you qualify for side by side.
Next step
See what your business qualifies for
Businesses with $20,000+ in monthly revenue and six months of history qualify. Three minutes, three bank statements, decision in minutes.