Before you apply anywhere, understand what each financing type actually costs, requires, and expects — from a lender's perspective, not a broker's.
| Category | Merchant Cash Advance | Private Lender | Traditional Bank |
|---|---|---|---|
| Funding speed | 1–3 days | 1–3 weeks | 2–8 weeks |
| Typical loan size | $5,000–$500,000 | $100,000–$25MM+ | $100,000–$25MM+ |
| Typical cost of capital | 30%+ annualized Highest cost | 12%–25% Mid range | 6%–10% Benchmark-tied |
| Rate structure | Factor rate (1.2x–1.5x of advance). Not APR — effective rate is often 50–150%+ | Fixed or floating. Often Prime + spread or SOFR + spread | WSJ Prime, SOFR, Treasury yield, or other index plus lender-specific spread |
| Underwriting basis | Primarily revenue-based. Bank statements drive approval | Cash flow & collateral. Asset-based lenders focus on collateral quality | Cash flow, collateral, guarantor support, DSCR, global cash flow analysis |
| Financial statements | Minimal — often just 3–6 months bank statements | Usually required — 2 years P&L and balance sheet | Required — 2–3 years business and personal returns, CPA-prepared preferred |
| Tax returns | Sometimes — depends on lender and size | Usually required | Almost always required — business and personal for all guarantors |
| Personal guarantee | Often required | Usually required | Standard requirement for most business loans under $5MM |
| Collateral & security | Often unsecured or blanket UCC lien on business assets | Asset-based lines use borrowing base on A/R and inventory. DACA accounts required for deposit control. Monthly reporting requirements | UCC-1 filing on business assets plus personal guarantee. CRE loans add deed of trust. SBA adds additional lien requirements |
| Borrowing base / availability | Not applicable — fixed advance amount | Advance rate on eligible A/R (typically 80–85%) and inventory (50–65%). Concentration limits apply — single debtor over 20–25% of A/R typically excluded | LOC requires borrowing base certificate. Concentration limits enforced. Field exams may apply for larger facilities |
| Ongoing reporting | Minimal — auto-debit from bank account | Monthly borrowing base certificates, A/R agings, financial statements, DACA account monitoring | Annual reviews, financial covenant compliance, periodic A/R agings, annual loan review by underwriting |
| Financial covenants | None typically | Sometimes — minimum liquidity, leverage ratios | Common — minimum DSCR (1.20x–1.25x), leverage ratio, minimum liquidity. Violation triggers default or waiver process |
| Repayment frequency | Daily or weekly — auto-debited from merchant account | Monthly | Monthly |
| Prepayment | Often no benefit — full factor rate owed regardless of early payoff | Varies — some have prepayment penalties | Fixed rate loans may carry prepayment penalties. Floating rate usually none |
| Best use case | Emergency liquidity only. Short-term bridge when no other option exists | Growth, acquisition, bridge financing. Asset-heavy businesses with strong collateral | Long-term growth capital, working capital lines, CRE acquisition, equipment financing, SBA programs |
MCAs fund in days because they skip underwriting. That speed is priced into the rate. A 1.4x factor on a $200K advance equals $80,000 in financing cost — often due in under 12 months.
Asset-based lines come with borrowing base certificates, DACA accounts, monthly reporting, and field audits. Availability fluctuates with your A/R. It is not a simple credit line.
The lowest cost of capital comes with the highest documentation bar. DSCR, global cash flow, guarantor analysis, covenants. If your deal is bankable, the 6–8 week timeline is worth it.
The goal is obtaining the right financing. A business that qualifies for a bank line of credit at 8.5% should never be paying a factor rate equivalent to 60% annualized. Knowing which box your deal fits — before you apply — is how you avoid expensive mistakes.
We review your financials the way a bank does and tell you exactly where you stand — before you apply anywhere.