Compare finance types
Line of credit vs Merchant cash advance: which is right for your business?
The main difference between a business line of credit and a merchant cash advance is how they are secured and repaid: a business line of credit suits seasonal or project-based businesses managing cash-flow timing, while a merchant cash advance suits cafés, restaurants, salons, bars and retailers with steady card sales that need funds fast for stock, a fit-out, equipment or a busy season.
Line of credit vs Merchant cash advance at a glance
| Business line of credit | Merchant cash advance | |
|---|---|---|
| What it is | A business line of credit is an approved limit you can draw on, repay and redraw as needed, paying interest only on the amount used. It suits businesses whose funding needs rise and fall through the year. | A merchant cash advance is a lump sum advanced against your future card sales, repaid automatically as a small share of each day’s card takings until an agreed total is repaid. Approval is fast, no property security is needed, and repayments rise and fall with your trade. |
| Amount | $10,000 – $500,000 | $5,000 – $300,000 |
| Term | 6–24 months | 3–18 months |
| Indicative rate | 11.5% – 24% p.a. | 25% – 60% p.a. |
| Rate type | Variable | Factor rate |
| Security | Unsecured (guarantee may apply) | Unsecured (guarantee may apply) |
| Repayments | Weekly or monthly minimums on the drawn balance | A set percentage of daily card settlements |
| Typical speed | 1–3 business days | 24–48 hours |
| Best for | Seasonal or project-based businesses managing cash-flow timing | Cafés, restaurants, salons, bars and retailers with steady card sales that need funds fast for stock, a fit-out, equipment or a busy season |
| Consider the other if | A single large purchase you will repay over years | Businesses paid mostly by invoice or bank transfer, where invoice finance or a line of credit usually fits better |
| Tax | Interest and line fees on business use are generally deductible. | The cost of a business-purpose advance is generally deductible. Confirm the treatment with your accountant. |
Rates are indicative, change without notice and depend on the lender, product, asset, term and your credit profile at the time of application. They are not an offer of finance. Comparison rates, where shown, are true only for the example given.
When to choose a business line of credit
A business line of credit is usually the better fit for seasonal or project-based businesses managing cash-flow timing. Its main advantages are pay interest only on what you draw, redraw without reapplying, buffer against slow-paying customers. Consider the alternative if a single large purchase you will repay over years.
When to choose a merchant cash advance
A merchant cash advance is usually the better fit for cafés, restaurants, salons, bars and retailers with steady card sales that need funds fast for stock, a fit-out, equipment or a busy season. Its main advantages are repayments fall automatically in quiet trading periods, funding in 24–48 hours with minimal documentation, no property security required. Consider the alternative if businesses paid mostly by invoice or bank transfer, where invoice finance or a line of credit usually fits better.
Business line of credit
A business line of credit is an approved limit you can draw on, repay and redraw as needed, paying interest only on the amount used. It suits businesses whose funding needs rise and fall through the year.
Merchant cash advance
A merchant cash advance is a lump sum advanced against your future card sales, repaid automatically as a small share of each day’s card takings until an agreed total is repaid. Approval is fast, no property security is needed, and repayments rise and fall with your trade.