September 19th, 2019

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​ Loan Type Comparison: A Merchant Cash Advance, or MCA, is the agreement between a merchant and a lender to allow for smaller payments on an amount borrowed, rather than larger payments over a longer period of time. In this agreement, merchants essentially "sell" a percentage of their debit/credit card earnings to the lender. The lender is not a bank. Hence, they are not subjected to laws surrounding loans because the MCA is not technically a loan. Lenders can charge different interest rates than banks because of this.

A Term Loan is also a set amount loaned to a borrower, however, banks typically provide these loans. Unlike MCA's, these payments are not daily. Also unlike MCA's, the payments are a fixed amount on a fixed schedule. MCA's are different payments every day based daily revenue of a merchant. Term loans are usually fixed on a time period in various proximity to five years. Term loans are not based as much on financial assets like MCA's. Instead, the payments are often attained through the income produced by products that a business or merchant uses like machinery.
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