They solve different problems. This guide puts both on the same page with labeled example numbers so you can compare what each costs and how fast each moves.
Apply Now →A term loan is a loan: you borrow a set amount, pay interest, and repay on a fixed schedule, usually monthly. A merchant cash advance is structured as the purchase of a portion of future sales, repaid as a fixed total amount, often through regular payments tied to the business’s activity. The paperwork, the cost measurement and the underwriting differ, so the two are easy to compare badly.
| Term loan | Cash advance | |
|---|---|---|
| Cost shown as | Interest rate, often an APR | A fixed payback amount |
| Repayment | Fixed installments, usually monthly | Frequent smaller payments |
| What underwriting studies | Credit history, financials, often collateral and tax records | Recent bank deposits and activity |
| Usual speed | Longer, because of documentation | Shorter, because the file is smaller |
| Best for | Planned, long-lived investments | Short-term gaps and fast-moving opportunities |
The speed row is the main reason owners consider an advance. Texas Biz Funding works with working-capital requests from $25,000 to $5,000,000 and funds in as little as 24 hours after approval.
These are made-up figures to show how to compare, not our terms, not quotes and not typical outcomes.
Borrow $50,000 at 12 percent a year, repaid over 12 months. The monthly payment is about $4,440 and the total repaid is about $53,300. Interest cost: about $3,300.
Receive $50,000 and repay a fixed $62,500 over about six months. The cost is $12,500, which looks like 25 percent of the advance.
That 25 percent is misleading if read as an annual rate. Because you are repaying along the way, the average amount outstanding is closer to half of $50,000, and the money is used for half a year. Roughly: $12,500 on about $25,000 outstanding for half a year is about 100 percent annualized.
The advance in Example B costs far more than the loan in Example A per dollar per year. But it is also repaid in six months, it was available faster, and it might have been the only option for an owner who needed to fix a failed compressor before the weekend rush. Whether the extra cost is worth it depends on what the money earns or saves.
Sole proprietors can apply with us. The application takes about five minutes and uses a soft credit pull.
It is structured differently: a purchase of future receipts repaid as a fixed total. That is why the cost is stated as a payback amount rather than an interest rate.
Because repayment starts immediately and the balance falls quickly, so the annualized figure depends heavily on how short the repayment is.
In most cases a term loan costs less per year. The trade-off is speed and the paperwork needed to qualify.
When delay costs more than the difference, such as missing a seasonal window or losing a customer because equipment is down.
No. They are round illustrations to show the method of comparing offers.
Three months of business bank statements and a 5-minute application. FICO 500+ considered. $25,000 to $5,000,000, funded in as little as 24 hours.
Apply Now →It takes about two minutes and it will not affect your credit score.
No obligation • No impact to your credit score
