Comparing options
Factoring vs a line of credit vs a merchant cash advance
All three can put cash in your account. They work very differently, and the right one depends on your customers, your credit and how fast you need it.
Side by side
Invoice factoringYou sell unpaid invoices to business or government customers. Approval leans on your customers' credit. Cost grows with how long they take to pay.
Bank line of creditYou borrow against a limit and pay interest on what you use. Usually the lowest cost, but approval depends on your credit, history and financials, and can take weeks.
Merchant cash advanceYou sell a share of future sales and repay through daily or weekly debits. Fast and easy to get, usually the most expensive, and the debits continue in slow weeks.
When each one tends to fit
- A line of credit fits a business with solid credit and time to apply. If you qualify for a good one, it's often the cheapest money.
- Factoring fits a business that bills other businesses or government, grows faster than the bank will lend, or is newer. It scales with your sales.
- A cash advance fits a short, urgent need when nothing else is available. Read the total payback, not just the advance.
Can you have more than one?
Sometimes, but they can collide. Factoring companies want first claim on your receivables. A bank line or cash advance that already claims them usually has to be paid off or agree to step back, often from the first factoring payment. Tell any funder about existing financing up front; it saves weeks.
General information, not legal, tax or accounting advice. Every funder and contract is different. Examples use made-up numbers.
See what factoring would look like for you
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