Compare finance types
Merchant cash advance vs Trade finance: which is right for your business?
The main difference between a merchant cash advance and a trade finance 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 trade finance suits importers, wholesalers and distributors with proven sales and reliable suppliers.
Merchant cash advance vs Trade finance at a glance
| Merchant cash advance | Trade finance | |
|---|---|---|
| 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. | Trade finance is a revolving facility that pays your suppliers for goods at the time of order and gives your business 60–180 days to repay, bridging the gap between paying for stock and being paid for it. It covers both imported and domestic purchases. |
| Amount | $5,000 – $300,000 | $50,000 – $5,000,000 |
| Term | 3–18 months | 2–6 months |
| Indicative rate | 25% – 60% p.a. | 9% – 20% p.a. |
| Rate type | Factor rate | Variable |
| Security | Unsecured (guarantee may apply) | Secured by receivables |
| Repayments | A set percentage of daily card settlements | Each drawdown repaid in full at the end of its term |
| Typical speed | 24–48 hours | 1–3 weeks to establish, then 24–48 hours per drawdown |
| Best for | Card-heavy retail and hospitality businesses with seasonal swings and an urgent, short-term need | Importers, wholesalers and distributors with proven sales and reliable suppliers |
| Consider the other if | Businesses paid by invoice or bank transfer, or anyone who would qualify for a conventional term loan | Service businesses with no stock, or one-off purchases that do not justify a facility |
| Tax | The cost of a business-purpose advance is generally deductible. Confirm the treatment with your accountant. | Interest and facility fees on trade borrowing are generally deductible. 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 trade finance
A trade finance is usually the better fit for importers, wholesalers and distributors with proven sales and reliable suppliers. Its main advantages are pay suppliers upfront and often negotiate better pricing, revolving limit recycles with each repayment, works alongside invoice finance to cover the full cycle. Consider the alternative if service businesses with no stock, or one-off purchases that do not justify a facility.
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.
Trade finance
Trade finance is a revolving facility that pays your suppliers for goods at the time of order and gives your business 60–180 days to repay, bridging the gap between paying for stock and being paid for it. It covers both imported and domestic purchases.