The short answer
A merchant cash advance buys future receivables and repays as a share of daily receipts, funding in days with light documentation and costing the most. A term loan repays on a fixed schedule at a lower rate but takes longer and demands stronger credit. A line of credit is revolving and only costs when drawn. Speed and accessibility are what an advance sells; price is what it charges for them.
A broker who can place all three has a better conversation than one who can only sell what they have. Even placing advances exclusively, knowing where the product genuinely loses makes you more credible on the calls where it wins.
| Advance | Term loan | Line of credit | |
|---|---|---|---|
| Speed to funding | 1–3 days | 1–6 weeks | Days to weeks |
| Documentation | 3–6 months of statements | Full financials, tax returns | Financials, often collateral |
| Credit sensitivity | Low | High | Moderate to high |
| Repayment | Share of daily receipts | Fixed instalments | Only on drawn balance |
| Cost | Highest | Lowest | Between |
| Best for | Urgent, short, revenue-backed need | Planned capital expenditure | Recurring working-capital gaps |
What the advance is actually selling
Speed and access. A merchant with an equipment failure on Tuesday who needs it running Thursday is not choosing between an advance and a bank line — the bank line takes six weeks and they will not get it. They are choosing between an advance and being closed.
That framing matters because it is honest. The advance is expensive relative to bank credit and it exists for merchants who either cannot access bank credit or cannot wait for it. Pretending otherwise is how brokers lose credibility on the second call.
When an advance is the wrong product
- A planned purchase months out. If they can wait, the price difference is real money and waiting is the right advice.
- Strong credit and clean financials. If they qualify for a term loan, an advance is a worse deal and they will discover that eventually.
- A recurring gap rather than a one-off need. That is what a line of credit is for, and an advance repaid and re-taken repeatedly is expensive.
- Thin margins that cannot absorb a daily remittance. If the repayment breaks their cash flow, everyone loses — including you, on the renewal you will never write.
Where advances genuinely win
- Time pressure measured in days.
- Recent credit damage that a bank cannot look past but revenue can.
- Seasonal businesses, where repayment flexing with receipts is a feature rather than a compromise.
- Merchants already carrying a position who need capital before it clears.
- Situations where the return on the money comfortably exceeds the cost — inventory at a discount, a contract that needs financing to accept.