Compare finance types
Invoice finance vs Merchant cash advance: which is right for your business?
The main difference between a invoice finance and a merchant cash advance is how they are secured and repaid: a invoice finance suits b2b businesses with reliable customers on long payment terms, while a merchant cash advance suits card-heavy retail and hospitality businesses with seasonal swings and an urgent, short-term need.
Invoice finance vs Merchant cash advance at a glance
| Invoice finance | Merchant cash advance | |
|---|---|---|
| What it is | Invoice finance is funding advanced against eligible unpaid business invoices, typically 70–90% of the invoice value upfront with the balance (less fees) paid when your customer pays. It uses your receivables as security rather than property. | A merchant cash advance is a lump sum advanced against your future card sales, repaid by taking an agreed percentage of each day’s card takings until a fixed total is repaid. It is priced with a factor rate rather than an interest rate, and it is one of the most expensive forms of business funding. |
| Amount | $20,000 – $5,000,000 | $5,000 – $300,000 |
| Term | 1–12 months | 3–18 months |
| Indicative rate | 8% – 18% p.a. | 25% – 60% p.a. |
| Rate type | Variable | Factor rate |
| Security | Secured by receivables | Unsecured (guarantee may apply) |
| Repayments | Settled when the customer pays each invoice | A set percentage of daily card settlements |
| Typical speed | 24–48 hours per invoice once set up | 24–48 hours |
| Best for | B2B businesses with reliable customers on long payment terms | Card-heavy retail and hospitality businesses with seasonal swings and an urgent, short-term need |
| Consider the other if | Businesses that sell to consumers or are paid at the point of sale | Businesses paid by invoice or bank transfer, or anyone who would qualify for a conventional term loan |
| Tax | Fees are generally a deductible business expense. | The cost of a business-purpose advance is generally deductible. Confirm the treatment with your accountant. |
Rates shown are indicative ranges observed across our lender panel for the period stated. They are not an offer or quote. Your rate depends on your business, the lender, the amount, the term and the security offered. The lender makes the final credit decision.
When to choose a invoice finance
A invoice finance is usually the better fit for b2b businesses with reliable customers on long payment terms. Its main advantages are grows with your sales, no property security, can be confidential. Consider the alternative if businesses that sell to consumers or are paid at the point of sale.
When to choose a merchant cash advance
A merchant cash advance is usually the better fit for card-heavy retail and hospitality businesses with seasonal swings and an urgent, short-term need. Its main advantages are repayments fall automatically in quiet trading periods, fast funding with minimal documentation, no property security required. Consider the alternative if businesses paid by invoice or bank transfer, or anyone who would qualify for a conventional term loan.
Invoice finance
Invoice finance is funding advanced against eligible unpaid business invoices, typically 70–90% of the invoice value upfront with the balance (less fees) paid when your customer pays. It uses your receivables as security rather than property.
Merchant cash advance
A merchant cash advance is a lump sum advanced against your future card sales, repaid by taking an agreed percentage of each day’s card takings until a fixed total is repaid. It is priced with a factor rate rather than an interest rate, and it is one of the most expensive forms of business funding.