A merchant cash advance gives you a lump sum now in exchange for a fixed dollar amount of your future receivables, remitted daily or weekly. A business line of credit lets you draw money up to a limit and pay interest only on what you use. A term loan gives you a lump sum that you pay back with interest on a fixed schedule. The right one depends on how fast you need the money, what you will use it for and what your business qualifies for.
Legend Advance Funding offers one of these: the merchant cash advance. We explain all three here so you can choose with the full picture.
Side-by-Side Comparison
| Merchant Cash Advance | Business Line of Credit | Term Loan | |
| What it is | Purchase of a fixed dollar amount of future receivables. Not a loan | Revolving credit you draw on as needed | Borrowed lump sum |
| How you receive funds | Lump sum up front | Draw up to your limit, when you need it | Lump sum up front |
| How it is paid | Daily or weekly remittances by ACH until the purchased amount is satisfied | Payments on what you have drawn; repaid funds can be drawn again | Fixed installments, usually monthly, over the loan term |
| How cost is set | Fixed dollar cost set in the agreement | Interest on the drawn balance, plus any fees | Interest over the term, plus any fees |
| What the provider looks at most | Business deposits, revenue consistency, time in business, existing obligations | Credit, revenue, financial statements; varies by lender | Credit, financials, often collateral; varies by lender |
| Typical speed | Days (Legend: decisions within 24 hours, funding 24 to 48 hours) | Varies by lender; set up once, then draw | Varies; bank loans often take weeks |
| Usually fits | Short-term, time-sensitive needs with a clear return | Recurring or unpredictable short gaps | Planned, longer-term investments |
Read across the table from the need, not the product. If you need money once, fast, for something that pays back soon, compare an advance. If you need flexible access over and over, a line of credit is built for that. If you are funding a long-term investment and can wait, a term loan is usually the lower-cost route if you qualify.
How a Merchant Cash Advance Works
With a merchant cash advance, a funder purchases a fixed dollar amount of your future receivables and pays you the capital up front. You then remit the purchased amount by ACH from your business bank account, daily or weekly, according to your agreement. Depending on the program and the reconciliation terms, remittances may reflect changes in your revenue.
The cost is a fixed dollar amount set when you sign: the difference between what you receive and what you remit. That is why we quote cost in dollars, not as a rate.
Underwriting focuses on your business, not just your credit. At Legend Advance Funding the baseline is 3 months in business, $20,000 or more in monthly revenue and an active US business checking account, with no strict minimum FICO for most programs. Advances range from $20,000 to $3,000,000. For the full explanation, including pros, cons and risks, see our guide to what a merchant cash advance is.
How a Business Line of Credit Works
A business line of credit sets a limit you can draw against. You take what you need, pay interest on the amount drawn, and as you pay it down, that amount becomes available again. It works like a reserve for gaps you cannot predict exactly, such as uneven customer payments or a repair that comes up.
Lines of credit are offered by banks and other lenders, and the requirements, limits and pricing vary by lender. Legend Advance Funding does not offer lines of credit.
How a Term Loan Works
A term loan is a lump sum you borrow and pay back in fixed installments over a set term, with interest. Payments are the same whether your month was strong or weak, which makes them easy to plan but harder to carry in a slow season. Bank term loans usually look closely at credit and financial statements and may require collateral, and the approval process can take weeks.
Term loans are offered by banks and other lenders. Legend Advance Funding does not offer term loans.
Which One Fits Your Situation?
- You need cash this week for inventory or a repair that is stopping sales. A merchant cash advance is built for speed and is underwritten on your deposits.
- You have recurring short gaps and want money available when they happen. A line of credit fits, if you can qualify.
- You are funding a long-term project, can wait several weeks and have strong credit. A term loan is usually the lower-cost choice.
- A bank has already said no. An advance can still be an option, because underwriting looks at business performance first. See where to go when banks say no.
- Your deposits are already stretched by existing obligations. Adding any new obligation may make things worse. Fix the cash-flow problem first.
Questions to Ask Before You Choose
- What is the total dollar amount I will pay back or remit, and over how long?
- How often are payments taken, and what does each one cost my account?
- What happens if my revenue drops?
- What fees apply on top of the stated cost?
- Can my slowest month carry the payment and still cover payroll and rent?
See If a Merchant Cash Advance Fits
If speed matters and your business has steady deposits, see what you qualify for. Applying takes about five minutes.
Check My Merchant Funding Options
Merchant cash advance terms vary by business and funding agreement. All funding is subject to underwriting, verification and approval. Available to US businesses only.