MCA vs. Business Line of Credit — Side-by-Side Comparison

By Filip Kozina · Co-Founder, Commera Funding

Reviewed June 8, 2026 · 8 min read

The short answer

A business line of credit (LOC) is cheaper than a merchant cash advance (MCA) and is the better choice if you qualify for one and can wait 1–4 weeks for setup. A line of credit only charges interest on what you draw, scales with your need, and can be reused as you pay it down.

An MCA is the better choice when you (a) can't qualify for a line of credit because of credit, time in business, or revenue volatility, or (b) need capital in 24–48 hours and don't have the runway to wait for an LOC setup.

For most established businesses with 650+ FICO and 2+ years of operating history, a line of credit is the right first stop. For everyone else — including the majority of MCA applicants — the LOC isn't actually available, so the comparison is theoretical.

What a business line of credit actually is

A business line of credit is a revolving credit facility — like a credit card but typically with a higher limit, lower rates, and bank-style underwriting. You're approved for a maximum amount (say $100K), you draw down what you need, and you only pay interest on the drawn balance. As you pay down the balance, the credit is replenished and you can draw again.

Bank LOCs run 8–18% APR mid-2026; online LOCs (Bluevine, OnDeck, etc.) run 15–30% APR but are faster to set up. Most LOCs have an annual review where the bank can adjust your limit or terms based on your most recent financials.

Qualification: typically 650+ FICO, 2+ years in business, $250K+ annual revenue, and often a personal guarantee from the owner. Some online LOCs go lower (600 FICO, 1 year in business) but charge accordingly.

What a merchant cash advance actually is

An MCA is not a loan — it's a purchase of a portion of your future business receivables. A funder advances you, say, $75K against your future revenue, and recoups the advance plus a markup (the 'factor rate') by taking a small percentage of your daily or weekly revenue until they've collected the full amount.

MCAs use a factor rate (typically 1.15–1.50×), not an APR. A $75K advance at a 1.35 factor rate means you repay $101,250 total — fixed at signing, regardless of how long it takes to repay. See our [factor rate explainer](/resources/what-is-a-factor-rate) for the full math.

Qualification: 500+ FICO, 6+ months in business, $20K+ monthly revenue. No collateral. Funding in 24–48 hours after documentation clears.

Side-by-side comparison

**Cost.** LOC: 8–18% APR (bank) / 15–30% APR (online). MCA: factor rate 1.15–1.50× (effective APR varies widely by repayment speed). For a $75K need repaid over ~7 months, the LOC costs roughly $4–8K in interest. The MCA at a 1.30 factor costs $22,500 fixed. The LOC is materially cheaper IF you qualify.

**Speed.** Bank LOC: 2–4 weeks for the initial line setup. Online LOC: 1–3 business days. MCA: 24–48 hours after documentation. Once an LOC is set up, drawing on it is instant — so the speed gap only applies to the first deal.

**Qualification.** Bank LOC: 650+ FICO, 2+ years in business, $250K+ revenue, often personal guarantee. Online LOC: 600+ FICO, 1+ year in business. MCA: 500+ FICO, 6+ months in business, $20K+ monthly revenue. MCA accepts businesses banks reject.

**Collateral.** Bank LOC: often requires business assets or personal guarantee. Online LOC: usually personal guarantee only. MCA: no formal collateral; personal guarantee may apply depending on funder.

**Repayment structure.** LOC: monthly interest payments on the drawn balance, repay principal as cash allows, draw again as the balance frees up. MCA: daily or weekly fixed-percentage deduction from revenue until the full factor amount is collected.

**Flexibility.** LOC: you only pay for what you draw. MCA: the full advance is funded upfront whether you need all of it or not.

**Best for.** LOC: ongoing variable cash flow needs, payroll bridges, inventory cycles, businesses with strong credit and steady operating history. MCA: time-critical needs, variable-revenue businesses, sub-650 credit, businesses unable to wait weeks for setup.

Real example — same $50K need, both options

Scenario: $50K capital need for a Q4 inventory pre-buy. Business does $80K/month revenue, 4 years operating, 690 FICO.

**Line of credit option** (this business qualifies): Bank approves a $100K LOC at 10% APR. Owner draws $50K for the pre-buy. Pays $416/month interest on the drawn balance. Sells through the inventory over 6 months and pays the principal down as revenue comes in. Total interest cost: roughly $1,250. Plus a small annual line fee. Total cost: ≈$1,500.

**MCA option** (same business, hypothetically): Funder advances $50K at a 1.25 factor rate. Total repayment $62,500. Daily debit of 8% on $80K/month revenue = ~$213/day. Estimated 130-day repayment. Total cost: $12,500.

For a business that qualifies for the LOC, the LOC is roughly 8× cheaper for this scenario. The MCA isn't 'bad' — it's just not the right tool when the LOC is available.

Now flip the scenario: same $50K need, but 4 months in business, 580 FICO, $25K/month revenue. The LOC isn't available. MCA cost is ≈$15K (higher factor rate at this profile). The relevant comparison stops being LOC vs MCA — it becomes MCA vs no funding at all.

When MCA is the right call (and the LOC isn't)

Choose an MCA over an LOC if any of these apply:

• FICO under 650, especially under 600 — most LOCs aren't available. • Under 2 years in business — bank LOCs typically require 2+ years. • Revenue under $200K/year — most bank LOCs require $250K+ annual. • You need capital in 24–48 hours and don't have time for LOC setup. • You've been declined for an LOC already (a soft decline usually predicts a hard decline elsewhere too — work with what you can actually get). • Your revenue is highly seasonal or volatile — fixed monthly LOC interest is harder to budget than MCA's revenue-scaled deductions.

If any of those describe your situation, the right comparison isn't 'should I get an LOC instead' — it's 'is the MCA cost worth the funding I'm actually able to access.'

When the line of credit is clearly the right call

Choose an LOC over an MCA if all of these apply:

• 650+ FICO (700+ for the best terms). • 2+ years in business with clean operating history. • $250K+ annual revenue. • You can wait 1–4 weeks for bank-side setup, or have time to apply to an online LOC for faster turnaround. • You have ongoing, variable cash-flow needs rather than one large lump-sum purchase.

In that case, the LOC will cost you roughly an order of magnitude less than an MCA. There's no honest reason to pick MCA over LOC if the LOC is genuinely available to you. A broker pushing MCA at a business that qualifies for an LOC is doing the wrong thing.

What to ask before signing either one

**Line of credit questions:** What's the actual draw rate (APR) vs the carrying rate? Is there an annual line fee, draw fee, or minimum-draw requirement? Is the limit reviewed annually and can the bank reduce it? Is there a prepayment penalty on the drawn balance?

**MCA questions:** What's the exact factor rate (not a range)? What's the total dollar repayment? Daily or weekly debit amount in dollars? Estimated repayment timeline? Any fees beyond the factor (origination, ACH, prepayment, default)? Is there a discount for early repayment?

If the funder — either kind — can't put all of that in writing before you sign, walk away.

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