Side by side

Choose Chartered bank term loan when

• The file is bankable: strong credit, 2+ years, clean financials
• The need is planned and can wait several weeks
• Total cost of capital is the deciding factor
• A fixed repayment schedule suits stable revenue

Choose Merchant Cash Advance (MCA) when

• The opportunity or obligation expires in days, not weeks
• Credit history blocks bank approval but deposits are strong
• Revenue swings and remittances need to flex with it
• The capital produces a return that clearly exceeds its cost

When both make sense

They rarely run together, but they do appear in sequence: an advance carries an urgent, short-lived need, and the business refinances into cheaper structured debt once the file supports it. Taking an advance for a long-term need it cannot outearn is the misuse that gives the product its reputation.

A business considering the advance should always price the alternative first — if a bank or a term lender can move fast enough, the cheaper instrument wins.

Frequently asked questions

Why would anyone take the expensive option?

Because the cheap option is often not actually available — or not available this week. A confirmed order, a supplier discount, an equipment auction, or a payroll gap does not wait three to ten weeks for bank underwriting. The advance is priced for speed and risk; used on a short-lived, high-return need, the math works. Used as long-term capital, it does not.

Does taking an MCA hurt future bank financing?

Heavy reliance on advances — especially several at once — reads as distress in bank underwriting. A single advance taken, used, and retired is routine. The path many businesses follow is advance first, structured debt after, as history and financials strengthen.

What do the two actually underwrite?

The bank underwrites the past: credit history, financial statements, years in business. The advance underwrites the present: what actually moves through the business bank account each month. That is why the same file can fail one and pass the other.

Related

• Chartered bank term loan vs Business Line of Credit — A chartered bank term loan is cheaper and should be your first call if the business is bankable — two or more years of history, clean financials and strong credit.
• Invoice Factoring vs Merchant Cash Advance (MCA) — If the business invoices other businesses, factoring is almost always the cheaper answer — it advances money the business has already earned, priced from 1.5% per 30 days, and creates no debt.
• Term Loan vs Merchant Cash Advance (MCA) — A term loan is the cheaper instrument and the right one whenever the file can carry it — fixed payments, a defined end date, and pricing quoted as an annual rate.
• Equipment Financing vs Term Loan — If the money is going into a specific piece of equipment, finance the equipment.
• Purchase Order Financing vs Invoice Factoring — These are not alternatives — they are consecutive.
• Inventory Financing vs Business Line of Credit — A line of credit is underwritten on the business as a whole and can be spent on anything; inventory financing is underwritten on the stock and is used to buy stock.
• Equipment Financing vs Business Line of Credit — Buy the machine on equipment financing and keep the line of credit for working capital.
• Chartered bank term loan vs Invoice Factoring — If your file is bankable — strong credit, two-plus years of history, clean financials — the bank loan is the cheaper instrument and you should pursue it first.
• Inventory Financing vs Purchase Order Financing — The difference is whether a customer exists yet.
• RBC Royal Bank business operating line vs Business Line of Credit — If RBC will approve the operating line inside your timeline, take it — the rate on a bank line is lower than anything a non-bank lender can price.
• TD Canada Trust business line of credit vs Business Line of Credit — For a business with filed statements and clean guarantor credit, a TD business line of credit is cheaper than any non-bank alternative and should be the first application.
• Scotiabank receivables-secured operating facility vs Invoice Factoring — A Scotiabank receivables facility is the cheaper way to finance invoices and the right call if your receivables fit a bank margin formula: many customers, none dominant, all under ninety days, all easy to credit-check.
• BMO Bank of Montreal equipment term loan vs Equipment Financing — If BMO will write the equipment term loan and the delivery date allows, take the bank rate — nothing else prices lower on a long-lived asset.
• CIBC business term loan vs Term Loan — A CIBC business term loan is the cheapest way to fund a defined, one-time capital need, and a bankable file should apply there first.
• National Bank of Canada receivables-secured operating facility vs Invoice Factoring — For a Quebec business with a diversified receivables book, a National Bank operating facility is cheaper than factoring and easier to run in French from end to end.
• Desjardins equipment financing through a caisse vs Equipment Financing — If you are an established Desjardins member and the caisse will finance the machine, that is the cheapest capital available and the relationship is worth protecting.
• Vancity business line of credit vs Business Line of Credit — For a British Columbia business whose work fits Vancity's mandate, a credit union line of credit is cheaper than a non-bank facility and worth the application.
• ATB Financial equipment term loan vs Equipment Financing — For an Alberta business buying new equipment, ATB is a genuinely well-matched lender and should get the first quote — provincial focus means the underwriting understands your cycle.

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