MCA vs Overdraft: Which is Better?

Quick Comparison

• Overdraft if: Need under £25k, have good banking relationship, want cheapest (10-15% APR)
• MCA if: Need over £25k, bank won't increase overdraft, or want flexible repayment

Cost Comparison: £20k

• Overdraft (12% APR): £2,400/year if fully used
• iwoca MCA (1.20x): £4,000 total over 8 months

When to Use Overdraft

• Short-term gaps (1-3 months)
• Under £25k needed
• Good banking relationship

When to Use MCA

• Need over £25k (overdraft caps)
• Bank declined overdraft increase
• Want to avoid maxing out overdraft (damages banking relationship)

Conclusion

Overdraft is cheaper but limited. MCA more expensive but offers £50k-£500k. Use overdraft for small, short-term needs. Use MCA for larger, longer-term funding.