MCA vs Line of Credit: The Real Cost Comparison
The merchant cash advance industry is the most-maligned and least-understood corner of small-business finance. Here's the math, the use cases where it wins, and the use cases where a line of credit beats it by 30+ points of APR.
Factor rate vs APR
A 1.35 factor on a $100k advance means you repay $135k. If the remit window is 6 months, that's roughly a 90% APR — not 35%. The shorter the remit, the higher the effective APR.
When MCA wins
Speed (24-hour funding), bad credit, no collateral, revenue-flex remits (slow weeks = lower remits). For a 30-day bridge where the deal pays off within a week of funding, the APR math is irrelevant — the absolute dollar cost is small.
When LOC wins
Anything you'll carry beyond 60 days. A non-bank LOC at 18–28% APR with interest-only on the drawn balance crushes an MCA on total cost for sustained working capital needs.
The stacking trap
Layering 2–4 MCAs on top of each other is how good businesses die. If you're stacking, you need a consolidation product or a real LOC — not another advance.
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