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Low-doc loan vs Merchant cash advance: which is right for your business?
The main difference between a low-doc business loan and a merchant cash advance is how they are secured and repaid: a low-doc business loan suits established businesses without up-to-date financials, while a merchant cash advance suits card-heavy retail and hospitality businesses with seasonal swings and an urgent, short-term need.
Low-doc loan vs Merchant cash advance at a glance
| Low-doc business loan | Merchant cash advance | |
|---|---|---|
| What it is | A low-doc business loan is finance assessed on bank statements, ABN history and credit record rather than full financial statements and tax returns. Low-doc does not mean no documents or automatic approval. | 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 | $5,000 – $250,000 | $5,000 – $300,000 |
| Term | 3–36 months | 3–18 months |
| Indicative rate | 12% – 32% p.a. | 25% – 60% p.a. |
| Rate type | Fixed or variable | Factor rate |
| Security | Unsecured (guarantee may apply) | Unsecured (guarantee may apply) |
| Repayments | Daily, weekly or monthly | A set percentage of daily card settlements |
| Typical speed | 24–48 hours | 24–48 hours |
| Best for | Established businesses without up-to-date financials | Card-heavy retail and hospitality businesses with seasonal swings and an urgent, short-term need |
| Consider the other if | Larger amounts where full-doc pricing is materially cheaper | Businesses paid by invoice or bank transfer, or anyone who would qualify for a conventional term loan |
| Tax | Interest on business-purpose borrowing is generally deductible. | 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 low-doc business loan
A low-doc business loan is usually the better fit for established businesses without up-to-date financials. Its main advantages are fewer documents, fast decisions. Consider the alternative if larger amounts where full-doc pricing is materially cheaper.
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.
Low-doc business loan
A low-doc business loan is finance assessed on bank statements, ABN history and credit record rather than full financial statements and tax returns. Low-doc does not mean no documents or automatic approval.
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.