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Merchant cash advance vs Secured loan: which is right for your business?
The main difference between a merchant cash advance and a secured business loan is how they are secured and repaid: a merchant cash advance suits card-heavy retail and hospitality businesses with seasonal swings and an urgent, short-term need, while a secured business loan suits businesses with property or unencumbered assets borrowing larger amounts over longer terms.
Merchant cash advance vs Secured loan at a glance
| Merchant cash advance | Secured business loan | |
|---|---|---|
| What it is | 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. | A secured business loan is a lump-sum business loan backed by an asset you pledge — usually residential or commercial property, but sometimes equipment or a general security agreement over the business. Security lowers the lender’s risk, so rates are lower and terms longer than unsecured lending. |
| Amount | $5,000 – $300,000 | $50,000 – $5,000,000 |
| Term | 3–18 months | 12–180 months |
| Indicative rate | 25% – 60% p.a. | 6.8% – 13.5% p.a. |
| Rate type | Factor rate | Fixed or variable |
| Security | Unsecured (guarantee may apply) | Secured by property |
| Repayments | A set percentage of daily card settlements | Monthly, principal and interest or interest-only for a set period |
| Typical speed | 24–48 hours | 2–6 weeks including valuation |
| Best for | Card-heavy retail and hospitality businesses with seasonal swings and an urgent, short-term need | Businesses with property or unencumbered assets borrowing larger amounts over longer terms |
| Consider the other if | Businesses paid by invoice or bank transfer, or anyone who would qualify for a conventional term loan | Urgent funding needed this week, or amounts too small to justify valuation costs |
| Tax | The cost of a business-purpose advance is generally deductible. Confirm the treatment with your accountant. | Interest on business-purpose borrowing is generally deductible. Establishment and valuation costs may be deductible over time. Confirm 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 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.
When to choose a secured business loan
A secured business loan is usually the better fit for businesses with property or unencumbered assets borrowing larger amounts over longer terms. Its main advantages are materially lower rates than unsecured lending, larger amounts and terms up to 15 years, interest-only periods available on many facilities. Consider the alternative if urgent funding needed this week, or amounts too small to justify valuation costs.
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.
Secured business loan
A secured business loan is a lump-sum business loan backed by an asset you pledge — usually residential or commercial property, but sometimes equipment or a general security agreement over the business. Security lowers the lender’s risk, so rates are lower and terms longer than unsecured lending.