MCA vs bridge loan is a comparison merchants frequently raise when they are short on cash but own real estate or expect a near-term liquidity event. The two products are not substitutes in most cases — they serve different financial circumstances and price accordingly — but the comparison is informative for capital-stack decisions.
MCA mechanics recap. Lump-sum advance against future business revenue, factor-rate priced (typically 1.20–1.45 for total repayment), daily or weekly ACH collected automatically from the business operating account, 4–18 month terms, no real-estate collateral, personal guarantee from owner. Effective APR typically 40–80%. Unsecured by hard assets; secured by future receivables.
Bridge loan mechanics. Short-term loan secured by real estate (commercial or residential), monthly interest-only payments at 8–15% APR, single balloon principal at maturity (6–24 months), exit through refinance, property sale, or take-out by permanent financing. Loan-to-value typically 60–75% of real-estate value; some "hard money" lenders go to 80%. Personal guarantee usually required.
Side-by-side comparison.
| Attribute | MCA | Bridge loan |
|---|---|---|
| Legal structure | Sale of receivables | True loan |
| Collateral | UCC blanket on assets | First or second mortgage on real estate |
| Pricing | Factor rate 1.15–1.50 | APR 8–15% |
| Effective annualized cost | 40–80%+ | 9–18% (including fees) |
| Payment schedule | Daily/weekly ACH | Monthly interest, balloon principal |
| Term | 4–18 months | 6–24 months |
| Time to fund | 24–72 hours | 14–45 days |
| Documentation | Bank statements only | Title, appraisal, environmental, financials |
| Closing cost | $0–$500 | $5K–$25K (title, appraisal, legal, points) |
| Personal guarantee | Yes | Yes |
| Prepayment | Often penalty or no discount | Usually freely prepayable after lockout |
When MCA wins. 1. No real estate to pledge. Service businesses, restaurants without owned property, trucking companies, etc. MCA is the only option. 2. Need cash in 48 hours. Inventory shortage, payroll crisis, urgent vendor payment. Bridge loan cannot close fast enough. 3. Amount needed is too small for a bridge. Under $100K, bridge-loan closing costs ($5K–$15K) consume the economics. 4. Bridge would over-leverage the real estate. If a property is already at 60% LTV with permanent financing, a bridge layer may not fit.
When bridge loan wins. 1. Merchant owns commercial real estate with equity. A $1M building with $400K mortgage has $600K of accessible equity; a bridge loan at 70% LTV unlocks $300K at 12% APR — vastly cheaper than the same $300K from an MCA at 1.35 factor. 2. Clear exit strategy. Refinance into permanent loan, sale of property, take-out by SBA 504 — these are bridge-loan-shaped exits. 3. Long capital need (12+ months). MCA pricing escalates with time; bridge loan amortizes interest-only and is much cheaper for longer horizons. 4. Daily ACH would disrupt operations. MCA daily debits can stress cash flow; bridge monthly payments are easier to manage.
Total cost example on $300K, 12-month need. - MCA: $300K × 1.32 factor = $396K total repaid. Cost = $96K. Effective APR ~58%. - Bridge loan: $300K at 12% APR + 2 points + $8K closing costs = $36K interest + $6K points + $8K closing = $50K total cost over 12 months.
The bridge loan is roughly 50% cheaper, but requires real-estate collateral, 30-day closing, and exit plan.
Hybrid strategy — bridge plus MCA. Some merchants use a bridge loan as cheap base capital and supplement with a small MCA for true short-term needs. Example: $500K bridge for 12 months at 11% as working-capital base; $50K MCA at 1.30 factor for a 6-month inventory push. Total cost is substantially lower than $550K of pure MCA.
Common confusion. First, "bridge loans are for real estate purchases only" — bridges fund any short-term need backed by real estate equity, including working capital. Second, "MCA is always more expensive than bridge" — true on APR, but MCA has zero closing costs and 48-hour funding; bridge breaks even only at $100K+ and 6+ month horizons. Third, "I qualify for a bridge if I own a building" — bridge underwriters look at LTV after the bridge (typically max 70%), property condition, and exit clarity, not just ownership.
Related terms
- MCA vs loan (legal distinction) — An MCA is legally a purchase of future receivables, not a loan. This distinction exempts MCAs from state usury caps but requires specific contract structure — including reconciliation provisions.
- Merchant cash advance (MCA) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan.
- Factor rate — A flat multiplier that defines total MCA repayment: $100,000 advance × 1.30 factor = $130,000 repaid. It is not an interest rate; it does not compound.
- APR-equivalent — The annualized percentage rate implied by a factor-rate MCA. A 1.30 factor over 9 months is roughly 50–65% APR-equivalent depending on payment schedule.
- MCA vs merchant loan — MCA = sale of future receivables, not regulated as a loan, factor-rate priced, no usury caps. Merchant loan = actual loan, APR-priced, regulated under state lending laws, often state-licensed lender.
Authoritative sources
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