Side by side

Choose Invoice Factoring when

• You invoice other businesses on 30 to 90 day terms
• Your customers are creditworthy — larger companies, government, established mid-market
• You want funding that scales automatically as sales grow
• You would rather not add debt to the balance sheet
• Your own credit is bruised but your customers' is not

Choose Merchant Cash Advance (MCA) when

• Revenue is consumer-facing — retail, restaurants, e-commerce — so there are no B2B invoices
• You need capital in 24 to 72 hours and cannot wait for a facility to be set up
• Deposits are consistent even though credit or filed financials are weak
• The amount needed is modest and the payback horizon is short

When both make sense

They are not mutually exclusive. A business with both commercial receivables and card revenue can factor the invoices and use an advance to bridge a specific gap — provided the combined repayment is modelled properly rather than stacked blindly.

Frequently asked questions

Which one is cheaper?

Factoring, in almost every case where it is available. Factoring fees start around 1.5% per 30 days against an invoice you have already earned. An MCA at a 1.20 factor repays 120% of the advance regardless of term, which annualises far higher on a short payback. Compare both as total cost of capital — total repaid minus amount received.

Does either one create debt?

Factoring is the sale of an asset, so no debt is created and there is no fixed monthly payment. An MCA is not a conventional loan either, but it is an obligation repaid from future revenue and it does constrain cash flow while outstanding.

Will my customers know?

With notification factoring, yes — invoices direct payment to a lockbox. Non-notification factoring keeps customers paying your business as normal. An MCA involves no customer contact at all, which is sometimes the deciding factor.

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.
• 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.
• 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.
• Inventory Financing vs Merchant Cash Advance (MCA) — Both instruments put stock on the shelf without a bank loan, and the choice usually comes down to what the file supports.
• 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.
• Chartered bank term loan vs Merchant Cash Advance (MCA) — These sit at opposite ends of the same spectrum.
• 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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