MCA vs Business Loan: Which is Better?
Complete comparison: MCA fast but expensive, business loan slow but cheap. When to choose each, real cost examples, and which saves YOU more money.
Quick Verdict
MCA if: Need money in 24-48 hours, bank declined you, or have seasonal sales
Business loan if: Can wait 2-4 weeks, have good credit, want to save 60-70%
On £50k: MCA costs £12,500 over 8 months. Loan costs £4,580 over 2 years. Loan saves £7,920 but takes 3 weeks.
Side-by-Side Comparison
| Feature | Merchant Cash Advance | Business Loan |
|---|---|---|
| Approval Time | 24-48 hours ✓ | 2-4 weeks |
| Cost | 25-35% | 6-12% APR ✓ |
| Repayment | % of sales (flexible) ✓ | Fixed monthly |
| Credit Required | No (70% approval) ✓ | Yes (40% approval) |
| Personal Guarantee | Often not required ✓ | Required |
| Best For | Speed, bad credit, seasonal | Lowest cost, planning |
Real Cost Comparison: £50,000
Merchant Cash Advance (iwoca)
- Amount: £50,000
- Factor: 1.25x
- Total repay: £62,500
- Cost: £12,500 (25%)
- Term: ~8 months
- Repayment: Flexible (% of daily sales)
Business Term Loan (Funding Circle)
- Amount: £50,000
- APR: 8.9%
- Total repay: £54,580
- Cost: £4,580 (9%)
- Term: 24 months
- Repayment: Fixed £2,274/month
Difference: Loan saves £7,920 (63% cheaper)
When to Choose MCA
- Need money fast: Emergency, opportunity, or crisis
- Bank declined: Poor credit, short trading, seasonal sales
- Seasonal business: Sales vary 50%+ month-to-month
- No personal guarantee: Want to protect home/assets
- Short-term need: Will repay within 6-12 months
When to Choose Business Loan
- Good credit: Will qualify for 6-12% rates
- Can wait 2-4 weeks: Not time-sensitive
- Want lowest cost: Save 60-70% vs MCA
- Long-term funding: Need money for 2-5 years
- Prefer fixed payments: Like knowing exact monthly amount
Conclusion
No universal "better" option. MCA wins on speed and accessibility. Loan wins on cost. Choose based on your situation:
- Emergency/bank declined → MCA
- Good credit/can wait → Loan
- Unsure → Compare both, see actual offers