The basic distinction
A business loan is generally a borrowing arrangement with repayment terms and interest or other charges. An MCA is generally structured around the purchase of future business revenue. The actual agreement determines your obligations.
How costs are presented
Loans may describe cost using an interest rate, fees and APR. Advances commonly use a factor rate and an agreed total collection amount. A factor rate and an interest rate cannot be compared directly as if they measure the same thing.
Collection and repayment
Loan payment schedules vary by product. Advances may collect a share of card sales or make frequent scheduled withdrawals from a bank account. Review the actual schedule rather than assuming all products work the same way.
Compare offers on the same basis
- Cash you will actually receive
- Total cost, including all fees
- Payment amount and frequency
- Any security interests or personal guarantees
- Flexibility when business revenue changes
- Early payoff or settlement conditions
Suitability comes before speed
An advance may be costly, particularly where collections put pressure on your operating cash. Consider other available products and discuss the terms with a qualified adviser if needed. Skycoast’s website does not promise that a specific product is appropriate for your business.
Further reading: NerdWallet’s guide to merchant cash advances. Examples are educational and are not funding offers.