Business Loans vs. Merchant Cash Advances: Pros & Cons You Should Know

When a business needs fast capital, there’s no shortage of funding options available. Two of the most popular choices are business loans and merchant cash advances (MCAs). While both can provide the working capital needed to grow, cover expenses, or manage cash flow, they differ significantly in structure, speed, and flexibility. At Rowan Advance, we’re here to break it down so you can choose what’s right for your merchants.

What Is a Business Loan?

A traditional business loan provides a lump sum of money that’s repaid over time, usually with fixed payments. These loans often come from banks or alternative lenders and may be secured or unsecured.

Pros:

• Lower rates: Typically, business loans have lower interest rates than other forms of financing.

• Longer terms: Repayment periods can span several years, which may mean lower monthly payments.

• Credit-building: Timely payments can help improve business credit scores.

Cons:

• Slower approval process: Traditional business loans often require extensive documentation and can take weeks to fund.

• Tougher qualifications: Many lenders require strong credit, a solid business history, and financial statements.

• Inflexibility: Fixed monthly payments can strain a business during slow periods.

What Is a Merchant Cash Advance (MCA)?

A merchant cash advance isn’t a loan. It’s an advance based on future sales. Businesses receive an upfront sum and repay it via a percentage of daily credit card sales or fixed daily/weekly debits.

Pros:

• Fast funding: Approvals and funding can happen in as little as 24–48 hours.

• Flexible repayment: Payments adjust with revenue – slower days mean lower payments.

• Minimal documentation: Perfect for businesses with less-than-perfect credit or limited financials.

Cons:

• Higher costs: Factor rates (typically 1.28–1.40) can make MCAs more expensive than traditional loans.

• Shorter terms: Most advances are paid back within 4–12 months.

• Frequent payments: Daily or weekly withdrawals can impact cash flow if not managed properly.

Which One Is Right for Your Merchant?

Business Loans are ideal for established businesses with strong financials that need large amounts of capital and can wait for funding.

Merchant Cash Advances work well for businesses that need cash fast, have strong daily sales, and might not qualify for traditional loans—like restaurants, salons, or retail shops.

At Rowan Advance, we specialize in MCAs designed to move as fast as your business. With rates starting at 1.28, same-day approvals, and minimal stipulations, we make funding simple, fast, and flexible.

Need help choosing the right option for your merchant?
Let’s talk. Rowan Advance is here to help your clients get the capital they need—when they need it most.