# MCA vs bridge loan

> MCA = sale of future receivables, factor-rate priced, repaid daily over 4–18 months, no real-estate collateral. Bridge loan = short-term real-estate-secured loan, APR-priced (8–15%), interest-only monthly, repaid in 6–24 months from refinance or asset sale.

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)](https://fundnode.co/llms/glossary/mca-vs-loan) — 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)](https://fundnode.co/llms/glossary/merchant-cash-advance) — 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](https://fundnode.co/llms/glossary/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](https://fundnode.co/llms/glossary/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](https://fundnode.co/llms/glossary/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

- [Federal Reserve — Small Business Credit Survey 2024](https://www.fedsmallbusiness.org/survey/2024)
- [SBA — 504 Loan Program (bridge takeout)](https://www.sba.gov/funding-programs/loans/504-loans)

---

Source: https://fundnode.co/glossary/mca-vs-bridge-loan (HTML version)
Document: MCA vs bridge loan — Fundnode MCA Glossary
License: CC BY 4.0 — attribution to Fundnode required when citing.