MCA vs. Invoice Factoring — Which Is Right for B2B?

By Filip Kozina · Co-Founder, Commera Funding

Reviewed June 8, 2026 · 7 min read

The short answer

If you're a B2B business with invoiced customers who pay you on 30/60/90-day terms, invoice factoring is usually cheaper than a merchant cash advance for the same dollar amount. Your invoices are collateral, so the factor's risk is lower, and the cost reflects that.

If you're B2C, retail, restaurant, or any business that takes payment at the point of sale, factoring isn't available — you have no invoices to sell. An MCA is the relevant comparison.

The two products serve different business models. Picking between them is mostly about whether you have B2B invoices, not which is fundamentally 'better.'

What invoice factoring actually is

Invoice factoring is the sale of your unpaid B2B invoices to a third-party 'factor' at a discount, in exchange for immediate cash. You invoice your customer (say $20K for delivered services with Net 60 terms). Instead of waiting 60 days for payment, you sell the invoice to a factor. They pay you, say, 85% upfront ($17K) immediately. They collect the full $20K from your customer when payment lands. You get the remaining 15% minus the factor's fee when they collect.

Factor fees typically run 1–5% of invoice value per 30-day cycle. A $20K invoice held for 60 days at a 3% / 30 days fee costs $1,200 in factor fees. Your customer pays the factor directly — collections becomes the factor's responsibility.

Qualification: you must be B2B (or business-to-government) with invoiced sales. Your customers must be creditworthy — the factor's risk is your customers, not you. Most factors require $10K+ in invoices to start and won't factor invoices already overdue.

What an MCA actually is

An MCA is a purchase of a portion of your future business receivables — generally your overall revenue, not specific invoices. A funder advances you a lump sum (say $75K) against your future revenue and recoups the advance plus a markup (factor rate 1.15–1.50×) by taking a small percentage of your daily or weekly revenue until they've collected the full repayment amount.

MCAs work for B2C, B2B, retail, restaurant, services — anyone with consistent daily or weekly revenue. They don't require invoiced sales because the receivables they're buying aren't specific invoices, they're future revenue in general.

Qualification: 500+ FICO, 6+ months in business, $20K+ monthly revenue. No collateral, no specific customer creditworthiness needed. Funding in 24–48 hours.

Side-by-side comparison

**Who can use it.** Factoring: B2B only — must invoice customers. MCA: any business with consistent revenue (B2B, B2C, retail, services, restaurant).

**Cost.** Factoring: 1–5% per 30 days on invoice value (effective APR ≈ 15–60% depending on how fast customers pay). MCA: factor rate 1.15–1.50×, fixed total cost regardless of repayment speed.

**Speed.** Factoring: 1–7 days for the first setup, instant after that for repeat invoices with the same factor. MCA: 24–48 hours after documentation clears.

**Amount available.** Factoring: scales with your invoice volume — if you have $200K of unpaid invoices, you can factor most of them. MCA: typically capped at 1.0–1.5× monthly revenue (so $30K monthly revenue → $30–45K advance).

**Repayment.** Factoring: your customer pays the factor directly when the invoice comes due. You're not making payments — the customer is. MCA: daily or weekly debits from your business account until the full factor amount is collected.

**Collections responsibility.** Factoring: factor handles collections from your customers (this can be a feature or a friction point — see below). MCA: you keep your customer relationships entirely; only your business is on the hook.

**Customer relationship impact.** Factoring: your customer interacts with the factor for payment. Some customers don't care; some view it as a sign of financial weakness. MCA: zero customer-relationship impact.

**Best for.** Factoring: B2B businesses with stretched-payment customers, especially trucking, manufacturing, staffing, professional services, and government contractors. MCA: any business with consistent revenue, especially B2C/retail/restaurant or B2B with too few invoiced customers to factor.

Real example — same $50K need, both options

Scenario: B2B IT services company. $80K/month revenue, mostly from Net 60 invoices to mid-size corporate customers. Has $120K of unpaid receivables currently outstanding. Needs $50K for payroll while waiting on a major customer payment.

**Factoring option:** Factor advances 85% of selected invoices = $50K against ~$58.8K of invoiced receivables. Factor fee at 3% / 30 days, expected 45-day average collection: ~$2,650 total factor fees. Customer pays the factor when invoices come due; business gets the remaining 15% minus the fee. Total cost: ≈$2,650.

**MCA option** (same business, hypothetically): Funder advances $50K at a 1.30 factor rate. Total repayment $65K. Daily debit of 8% on $80K/month revenue = ~$213/day. Estimated 75-day repayment. Total cost: $15K.

For a B2B with invoiced receivables, factoring is ~5.5× cheaper here. The MCA isn't wrong — it's just not the right tool when factoring is available.

Flip the scenario: same $50K need, but the business is a restaurant — no invoiced receivables, all point-of-sale revenue. Factoring isn't available. MCA is the relevant tool, and ~$15K is what it costs.

When factoring is clearly the right call

Choose factoring over MCA if all of these apply:

• Your business is B2B or business-to-government. • Your customers are creditworthy (large corporations, government, established businesses — not other small businesses with credit risk of their own). • Your customer payment terms are 30 days or longer. • You have at least $10K of unpaid invoices to factor (most factors have a minimum). • Your customers being aware that a factor is involved doesn't hurt the relationship. (This varies by industry — in trucking, it's standard. In high-touch professional services, it can be awkward.)

In that case, factoring will usually cost less than an MCA for the same dollar amount.

When MCA is the right call

Choose MCA over factoring if any of these apply:

• You're B2C, retail, restaurant, or any business without invoiced sales. • Your B2B customers pay on Net 7 or COD (no invoices to factor for any meaningful duration). • You have invoiced customers but they're small businesses with weak credit (factors won't take the risk on them). • You need a lump sum bigger than what your invoice volume supports. • Your customers can't know about a third-party collection arrangement (some industries treat this as a confidence issue). • You want to keep all customer-payment relationships in-house.

In that case, MCA serves a need factoring can't fill.

Common myths about both products

**'Factoring is a sign of financial distress.'** Used to be. Today, factoring is a standard cash-management tool in trucking, staffing, manufacturing, and government contracting. The stigma is mostly outdated.

**'MCA is always more expensive than factoring.'** True for a B2B with strong invoiced customers. Not true for a B2C, restaurant, or any business factoring can't serve — the comparison doesn't apply.

**'Factoring is cheaper because the APR looks lower.'** Factoring fees are often quoted per 30 days. A 3% / 30 days fee on a 90-day collection is ~9% of invoice value, with an effective APR around 36% — not the 3% headline number. Read the fee structure carefully.

**'My customers will hate that a factor is involved.'** Depends entirely on industry. In trucking and staffing it's expected. In law/accounting/consulting, it can be a yellow flag. Ask the factor for their disclosure-to-customer process before signing.

Questions to ask any factor (and any MCA funder)

**Factoring questions:** What's the advance rate (% of invoice paid upfront)? What's the fee schedule (per 30 days? per week?)? Is the factoring 'recourse' (you owe the factor back if the customer doesn't pay) or 'non-recourse' (factor takes the loss)? Which customer invoices will the factor accept — all of them or only ones they pre-approve? How does the factor communicate with your customers?

**MCA questions:** Exact factor rate (not a range)? Total dollar repayment? Daily / weekly debit amount? Estimated repayment timeline? Any additional fees? Discount for early prepayment?

For either product, if the funder won't put the answers in writing before you sign, walk away.

Ready to see real MCA offers? Our [3-minute pre-qual](/apply) gives you matched offers from 3–5 funders in 2–4 business hours. Or see the [full small business financing landscape](/resources/types-of-small-business-financing) if you're still weighing options.