Side by side

Choose Term Loan when

• The use of funds is a one-time investment with a clear return
• You can supply financials and wait 7 to 20 days
• You want a fixed payment and a known payoff date
• Predictable monthly cost matters more than speed

Choose Merchant Cash Advance (MCA) when

• Capital is needed within 72 hours and the opportunity closes before that
• Credit or filed financials will not clear a term-loan underwriter
• Revenue is seasonal and repayment tied to a share of deposits fits better than a fixed instalment
• The business is under two years old

When both make sense

A common and defensible sequence is an advance to solve the immediate problem, then a term loan twelve months later once the repayment history exists — refinancing the short-term obligation into cheaper, longer money.

Frequently asked questions

How do I compare a factor rate to an interest rate?

Convert both to total cost of capital: total repaid minus amount received. A factor rate has no time dimension, so the same 1.20 costs the same whether repaid over six months or twelve — meaning the effective annualised cost roughly doubles as the term halves. Comparing 1.20 to a 20% APR as if they were equivalent badly understates the advance.

Does a merchant cash advance hurt my chances of a term loan later?

Not by itself. What hurts is uncontrolled stacking — several overlapping advances that a future underwriter reads as distress. One advance, repaid cleanly, is often neutral or mildly positive as evidence of repayment behaviour.

Which approves more easily?

The advance, clearly. It is underwritten on deposit consistency rather than credit score or filed statements, which is why businesses under two years old or with bruised credit can access it when a term loan is out of reach.

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.
• 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.

Start an application · Talk to an advisor