What's the cheapest of the three?

On APR-equivalent, a bank term loan (8–15% APR) is cheapest, followed by a business line of credit (10–30% APR), with an MCA the most expensive (50–80% APR-equivalent). But the cheapest product you don't qualify for is infinitely expensive — the right comparison is among the products you can actually access.

Which is fastest to fund?

MCAs typically fund in 24–48 hours. Lines of credit from fintechs (Bluevine, Fundbox) fund in 1–3 business days once approved. Term loans from banks take 2–8 weeks; SBA term loans can take 30–90 days.

Can I have all three at the same time?

Technically yes, but most term loan covenants prohibit additional debt without consent, and MCA contracts often restrict additional MCAs (stacking). A line of credit alongside a term loan is the most common multi-product combination.

Which one builds business credit?

Term loans and lines of credit report to business credit bureaus (Dun & Bradstreet, Experian Business, Equifax Business) when paid on time. MCAs typically do not — because they're structured as a sale of receivables, not a loan.

What if I have less than 6 months in business?

Most term loans and LOCs require 12+ months. Some MCA funders go down to 3–6 months for businesses with strong daily deposits. Realistically, businesses under 6 months are better served by personal credit cards or a founder loan than commercial financing.

MCA vs Line of Credit vs Term Loan — when each one fits in 2026

Three products, three very different shapes. Speed, cost, qualification bar, and repayment style all diverge. Here's how to know which one to ask for.

The 60-second answer

Term loan — a fixed sum, fixed schedule, fixed monthly payment. Cheapest on paper; hardest to qualify for. Best when you have a known, one-time capital need (a build-out, an acquisition, equipment).

Line of credit — a revolving pool you draw from as needed. You pay interest only on what's outstanding. Middle ground on cost and qualification. Best for ongoing cash-flow gaps, AR mismatches, or seasonal swings.

Merchant cash advance (MCA) — a lump sum repaid via daily ACH at a flat factor rate. Fastest and easiest to qualify for; most expensive. Best when speed matters more than price, or when traditional credit isn't an option.

Side-by-side

Typical amount: Term loan $25K–$5M; LOC $10K–$250K; MCA $5K–$500K.
Speed: Term loan 2–8 weeks; LOC 1–3 days (fintech) / 2–4 weeks (bank); MCA 24–48 hours.
APR-equivalent: Term loan 8–15%; LOC 10–30%; MCA 50–80%.
Repayment: Term loan monthly fixed; LOC interest on draw + flexible principal; MCA daily ACH at a flat factor.
Builds business credit: Term loan and LOC yes; MCA usually no.
Typical minimum revenue: Term loan $15K/mo; LOC $10K/mo; MCA $10–15K/mo.
Typical minimum TIB: Term loan 24+ months; LOC 12+ months; MCA 6+ months.
Personal guarantee: Usually required for all three under $250K.

When a term loan is the right call

A term loan is the right product when you know exactly how much you need, what you'll spend it on, and you can predict the monthly payment for the full term.

Known one-time need: A $200K kitchen build-out, a $400K acquisition of a competitor's customer book, a $150K equipment purchase.
Predictable revenue: Your last 24 months show consistent monthly revenue. You can model a $4,500/month payment without sweating.
You qualify for it: 24+ months in business, 650+ FICO, clean tax returns. If you tick those, a bank term loan or SBA 7(a) is the cheapest money on the market.

Worked example

A two-location restaurant takes a $150,000 5-year SBA 7(a) term loan at 11.5% APR to fund a third location. Monthly payment: about $3,300. Total interest paid: ~$48,000. Compare to an MCA at 1.32 factor: total cost $48,000 paid back in 12 months instead of 60. The SBA loan is dramatically cheaper — but the owner had to wait 8 weeks and submit two years of tax returns.

When a line of credit is the right call

A line of credit is the right product when your capital need is recurring, fluctuating, or hard to size in advance.

Cash-flow smoothing: AR collects slowly; payroll runs every two weeks regardless.
Seasonal businesses: Inventory load in October; revenue catches up by January.
Opportunity capital: A supplier offers 2% off if you pay in 10 days instead of 30 — you draw, take the discount, repay.
Building credit: Using and repaying an LOC reports positively to business credit bureaus.

The honest tradeoff

A line of credit you don't use costs you nothing on most products. A line you do use can compound expensive interest fast if you treat it like permanent debt. The discipline: draw, repay, draw again. Carrying a 70%-utilized LOC for 6 months straight usually means you needed a term loan, not an LOC.

When an MCA is the right call

An MCA is the right product when speed beats cost, or when you can't qualify for the alternatives.

The opportunity has a deadline: A big order needs inventory this week, not next month.
You can't qualify for a bank product: Thin credit, <2 years in business, irregular revenue, industry exclusion.
You've modeled the daily ACH against worst-week revenue: Not just the average week. The worst week.
It's a one-time bridge, not a habit: Repeat MCAs ("stacking") is how businesses fail.

We wrote a separate piece on how factor rates actually work — the math is surprising the first time you see it.

How they stack on cost — a real-world example

Same merchant, same $50,000 capital need, three product paths:

SBA 7(a) term loan, 5 years, 11.5% APR: Monthly $1,100, total interest ~$16,000. Takes 30–60 days to fund.
Fintech LOC drawn at $50K, 22% APR, repaid in 12 months: Monthly interest declines from $917 to $0, total interest ~$6,100. Funds in 1–3 days.
MCA, 1.32 factor, 12-month term: Total payback $66,000, total fee $16,000, daily $262. Funds in 24–48 hours.

The LOC is the cheapest path if you qualify and only need the money for ~12 months. The SBA loan is the cheapest path if you need the money for 3–5 years. The MCA is the right path if you can't access the other two or you need cash this week.

How to think about choosing

Three questions, in order:

How fast do I need it? If "this week," MCA. Otherwise, keep going.
Is the need one-time or recurring? One-time = term loan. Recurring or fluctuating = LOC.
Do I qualify? Bank-grade qualification (2+ yr TIB, 650+ FICO, clean tax returns)? Pursue term loan or SBA. Otherwise, fintech LOC or MCA.

Frequently asked questions

What's the cheapest of the three?: On APR-equivalent, a bank term loan (8–15% APR) is cheapest, followed by a business line of credit (10–30% APR), with an MCA the most expensive (50–80% APR-equivalent). But the cheapest product you don't qualify for is infinitely expensive — the right comparison is among the products you can actually access.
Which is fastest to fund?: MCAs typically fund in 24–48 hours. Lines of credit from fintechs (Bluevine, Fundbox) fund in 1–3 business days once approved. Term loans from banks take 2–8 weeks; SBA term loans can take 30–90 days.
Can I have all three at the same time?: Technically yes, but most term loan covenants prohibit additional debt without consent, and MCA contracts often restrict additional MCAs (stacking). A line of credit alongside a term loan is the most common multi-product combination.
Which one builds business credit?: Term loans and lines of credit report to business credit bureaus (Dun & Bradstreet, Experian Business, Equifax Business) when paid on time. MCAs typically do not — because they're structured as a sale of receivables, not a loan.
What if I have less than 6 months in business?: Most term loans and LOCs require 12+ months. Some MCA funders go down to 3–6 months for businesses with strong daily deposits. Realistically, businesses under 6 months are better served by personal credit cards or a founder loan than commercial financing.