MCA vs factoring
Both turn money you expect into money you have now. They are built for different businesses.
| Merchant cash advance | Invoice factoring | |
|---|---|---|
| What is sold | A share of future receipts | Specific unpaid invoices |
| Who it suits | Businesses with steady card or deposit revenue, including consumer-facing ones | Businesses that invoice other businesses and wait to be paid |
| How you pay | Daily or weekly payments until a set total is paid | Your customer pays the factor; fees depend on how long that takes |
| What drives cost | The total set at signing, plus fees | Invoice size, how long it stays unpaid, and your customers' payment history |
| What funders look at | Bank statements and deposit history | The creditworthiness of the customers who owe you |
| Main risk | Fixed payments against uneven sales | Fees that grow as invoices run late, and customers contacted by the factor |
Where factoring is the better fit
If your cash problem is that customers pay in 30, 45 or 60 days, factoring is aimed at exactly that. Your cost is tied to the invoices rather than to a fixed total, and you are not making daily payments against sales that depend on late-paying customers. Trucking, staffing and wholesale businesses often fit this pattern.
Where an advance is the better fit
If you sell to consumers, take payment on the spot, and have no invoices to factor, there is nothing to sell. Restaurants, retail and service shops usually fall here. An advance works from deposits, so it can be arranged without an invoice trail.
What they share
Either one can cost more than bank financing. Either one can be priced in ways that hide the real cost. Compare what you receive with what you pay in total, and ask how early payoff works. The cost guide lists the questions.
This site is about advances. If factoring fits you better, that is a good reason not to submit the form.