Merchant Cash Advance vs Equipment Financing
If the money is for a machine, a vehicle or other equipment, equipment financing is usually cheaper than a merchant cash advance, because the equipment itself backs the deal. An advance makes sense when the equipment is used or hard to value, the need is urgent, or the money also covers installation, training or other costs a lender won't finance.
How do an MCA and equipment financing compare?
| Merchant cash advance | Equipment financing | |
|---|---|---|
| What backs it | Your future sales | The equipment |
| Use of funds | Anything | The equipment, sometimes soft costs |
| Payments | Daily or weekly | Monthly, over the equipment's life |
| Term | Months | Often years |
| Approval leans on | Bank deposits | Credit, the equipment's value, time in business |
| If you stop paying | Default under the contract | The lender can take the equipment |
What secures each one?
Equipment financing is secured by the equipment you buy, which is why the rate runs lower and the term runs longer. An MCA is a purchase of future sales backed by a UCC filing on business assets, so no single machine is on the line.
What does each cost in dollars?
Say a new oven costs $40,000. A five-year equipment loan means a monthly payment spread over sixty months, with the oven as collateral. An advance of $40,000 at a 1.35 factor means $54,000 back over months, not years. Per week, that's a much bigger payment. If the oven pays for itself slowly, the long term wins. If the vendor needs cash this week for a used unit no lender will value, the advance may be the only way to get it.
When does each one fit?
- Equipment financing: new or easy-to-value equipment, time to wait, the business qualifies.
- Advance: used or unusual equipment, urgent timing, or costs beyond the equipment itself.
- Both: compare the weekly payment to the extra sales the equipment brings in.
Applying is free, and you never pay Afterfirst a fee. The funder pays our commission only if a deal funds, and the amount is in the offer paperwork before you sign.
What should you ask either provider?
- Who owns the equipment during the term?
- What's the total cost, including fees and any buyout at the end?
- Is there a down payment?
- What happens if the equipment breaks or you sell it?
- Is there a personal guarantee?
Get the answers in writing. An equipment lender's total cost and an advance's total payback are the two numbers to compare.
Questions about your file?
Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.