Merchant Cash Advance vs Revenue-Based Financing
A merchant cash advance and revenue-based financing both get repaid from your sales, so they sound alike. The difference is who they're built for. An advance buys future sales from businesses with daily card or bank deposits. Revenue-based financing is usually a loan to software or subscription businesses, repaid as a share of monthly revenue with a cap.
How do an MCA and revenue-based financing compare?
| Merchant cash advance | Revenue-based financing | |
|---|---|---|
| Legal form | A purchase of future sales | Usually a loan with revenue-based payments |
| Who offers it | MCA funders | Specialist funds and platforms |
| Typical business | Restaurants, retail, trades, services | Software, subscription, online brands |
| How payments work | Daily or weekly debit, or a split of card sales | Monthly share of revenue |
| Cost shown as | Factor rate | A repayment cap, like 1.2 times the amount |
| What's read | Bank deposits | Recurring revenue, margins, growth |
| Speed | Days | Often weeks |
How is each one repaid?
Both follow revenue. An MCA collects by daily or weekly ACH from your bank account, often as a fixed amount. Revenue-based financing takes a set percentage of monthly revenue measured through connected accounts, so the payment rises and falls each month.
What does each cost in dollars?
Say you need $50,000. An advance at 1.35 means $67,500 back, paid daily over about six months. A revenue-based deal with a 1.25 cap means $62,500 back, taking 8% of monthly revenue. If revenue is $80,000 a month, that's $6,400 a month and about ten months. The revenue deal costs less and takes longer. The advance is faster to get and fits businesses without recurring revenue.
When does each one fit?
- Revenue-based financing fits a business with recurring revenue, solid margins and time to wait.
- An advance fits a business with daily sales, a need that can't wait, and no recurring-revenue story to tell.
- If you qualify for both, compare total payback and the payment in your slowest month, not just the rate.
- If neither fits, look at a line of credit.
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?
- What's the total you'll pay back, in dollars?
- Does the payment follow your revenue, and how often is it checked?
- What happens if revenue falls sharply for a month?
- Is there a personal guarantee?
- Is there a discount for paying early?
Get the answers in writing and line them up side by side before you choose.
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.