Should You Get A Bank Loan Or Merchant Cash Advance?


Are you a business owner? Are you considering starting a business? Regardless, numerous industries are served by loans of varying types. One loan or funding technique may be better for one company than another. A lot depends on the type of business in question, whether it is a new or established business, whether or not a busy season is coming up, and much more. Some types of business funding/loan methods are as follows:

  • Micro-loans
  • Business line of credit
  • Merchant cash advances
  • Invoice financing or invoice factoring
  • Commercial real estate loans
  • Equipment loans
  • SBA loans and more

Here, we’ll examine a comparison: a bank loan vs. merchant cash advance (MCA).

Purpose For the Loan

If you have a short-term cash flow problem, as a business owner, you will likely opt for a merchant cash advance.

If, on the other hand, you’ve got some major investments coming up and you need a lot of capital, a small business owner may opt for a bank loan. Think about money for research and development, the purchase of equipment, expanding to a new location, and other major financing needs.

Speed of the Loan

If you’re going to get a loan from a bank, it may take months – weeks if you’re lucky – to get the cash in hand. If you don’t need your money in a hurry, this might not be a problem. But that’s a long time to wait if you need the money right now.

A shorter application process applies to an MCA. You could be approved in as little as a few days from the date of your application.

The Process of Repayment

To pay back an MCA, directly from your bank account or your daily credit sales (or possibly monthly), you will have payments removed by the lender. Instead of a fixed amount, you may have a percentage taken.

Monthly payments will be made on a bank loan. Some of your principal balance and your accrued interest will be paid with each payment. If you’re familiar with personal loans, auto loans, mortgages, etc., this is much along the same lines.


You’ll enjoy less stringent credit requirements if you apply for a merchant cash advance. Cash flow is more important than credit history in this case.

Banks closely examine your business plan, cash flow, collateral, credit score, credit history, and more when they consider you for a loan.

Loan Costs

No matter how you decide to fund your business – with a bank loan or a merchant cash advance – there will be costs associated with it. The calculation of those costs differ, however.

Get a more traditional approach with a bank loan. Based on certain criteria, an interest rate will be assigned by the lender. Both interest and principal will be included in each payment you make. Late fees, origination fees, and other additional fees may also be charged. You can usually save on interest if you pay the loan off early.

With a merchant cash advance, using a factor rate, a fixed amount of interest is charged. In this case, you wouldn’t benefit from paying off funds early because the interest is fixed. Compared to small business loans, this type of cash advance is likely to be more expensive.

Contact VIP Capital Funding When You Need a Loan or Cash Advance

We are VIP Capital Funding. We offer early prepayment discounts on flexible business loans. If you need working capital, a merchant cash advance, a small business loan, etc., turn to us before you seek funds anywhere else. Frequently, we say yes when the banks say no!

If you’d like early prepayment discounts, no upfront fees, a tax deductible interest rate, and more, speak to one of our representatives at 800-735-7754 or email us at

You can also hit the “Apply Now” tab on our homepage and use our convenient online form to get started.