Funding comparison
Short answer
Choose an invoice factoring for b2B businesses waiting 30–90 days for customer payments; choose an MCA for strong daily card or deposit revenue with an urgent capital need. Published ranges: Invoice factoring $10K–$5M, 24–48 hours, credit Revenue-based; MCA $5K–$500K, 24–48 hours, credit 500+. Compare both on total payback and payment size, not the headline rate.
Both products turn money the business is owed — or will earn — into cash within days, and both are priced as a fee rather than an interest rate, which is why they are confused with each other. The difference is the source: factoring advances against invoices your business customers already owe you, while a merchant cash advance is an advance against your own future card or deposit revenue. Which one fits depends on who your customers are and how they pay.
The short version
Invoice factoring converts eligible B2B receivables into working cash, with underwriting focused heavily on invoice quality and customer credit.
The short version
A merchant cash advance exchanges a portion of future business receipts for fast capital and generally carries more frequent remittances.
How they differ
Invoice factoring advances 70% to 90% of an eligible B2B invoice within one to three business days of setup, collects from your customer on the invoice's terms and pays you the rest less a fee of roughly 1% to 5% of the invoice per 30 days outstanding. There is often no minimum time in business and the owner's credit is secondary; the customer's credit and the invoice's validity matter most.
A merchant cash advance deposits $5,000 to $500,000 in as little as a day and is repaid by a daily or weekly remittance from revenue until a fixed amount — the advance times a factor rate of roughly 1.15 to 1.49 — has been paid. It requires only six months in business and credit around 500, because underwriting rests on deposit strength and consistency rather than on any customer.
The structural difference decides cost. Factoring is priced on a specific receivable and ends when the customer pays, so a 45-day invoice at 2% per 30 days costs about 3%; an MCA is priced on the whole business and remits every day regardless of how sales go, so the same dollars over nine months typically cost several times more. Factoring only works for businesses that invoice other businesses; an MCA works for anyone with steady deposits.
Side by side
Market ranges compiled from published lender and marketplace guidelines. They are not offers or guarantees; final terms depend on underwriting and the specific funding partner.
| Consideration | Invoice factoring | Merchant cash advance |
|---|---|---|
| Typical amount | $10,000 – $5,000,000 (70% – 90% advance on eligible invoices) | $5,000 – $500,000 |
| Term | Per invoice; 30 – 90 day invoice cycles | 3 – 18 months (remittance schedule, not a fixed term) |
| Time to fund | 1 – 3 business days after setup | Same day to 2 business days |
| Cost (market range) | Factoring fee 1% – 5% of the invoice per 30 days | Factor rate 1.15 – 1.49 (paid as a fixed amount, not interest) |
| Payment rhythm | Settled when the customer pays the invoice | Daily or weekly remittance from revenue |
| Time in business | No minimum in many cases; the customers' credit matters most | 6 months in business |
| Revenue guideline | Invoices to creditworthy business or government customers | $10,000+ monthly revenue (varies) |
| Credit guideline | Owner credit is secondary to customer credit | 500+ (revenue matters more than score) |
| Typical documents | Accounts-receivable aging report; Sample invoices and contracts; Customer list; Government ID and entity documents | 3–6 months of business bank statements; Government ID; Voided business check; Recent credit-card processing statements if relevant |
| Best for | B2B businesses waiting 30 – 90 days on invoices: trucking, staffing, construction subcontractors, wholesale | Fast working capital when revenue is steady but credit or time in business rules out bank financing |
| Watch-outs | Customers may be notified (non-notification factoring costs more); Recourse factoring puts unpaid invoices back on you; Fees compound if customers pay slowly | Daily remittance can strain thin-margin weeks; Cost is fixed: paying early does not reduce it unless a prepayment discount is written in; Stacking multiple advances quickly becomes unaffordable |
Read the table on eligibility first: factoring requires B2B invoices with creditworthy customers, while the MCA requires only consistent card or deposit revenue. On cost, factoring's 1% to 5% per 30 days on a single invoice is usually far below an MCA's factor rate spread over months of daily remittances. On speed the MCA wins by a day or two; on amount both scale with the business, factoring with the invoice volume and the MCA with monthly deposits.
Worked example
Each table estimates $50,000 at the lower end, midpoint and upper end of the product's published market range. The payment estimator below lets you change the amount or product.
| Scenario | Estimated payment | Total payback | Cost of capital | Basis |
|---|---|---|---|---|
| Lower end of range | $750 / invoice | $50,750 | $750 | 1.0% per 30 days |
| Midpoint | $2,250 / invoice | $52,250 | $2,250 | 3.0% per 30 days |
| Upper end of range | $3,750 / invoice | $53,750 | $3,750 | 5.0% per 30 days |
| Scenario | Estimated payment | Total payback | Cost of capital | Basis |
|---|---|---|---|---|
| Lower end of range | $304 / business day | $57,500 | $7,500 | 1.15x |
| Midpoint | $349 / business day | $66,000 | $16,000 | 1.32x |
| Upper end of range | $394 / business day | $74,500 | $24,500 | 1.49x |
Factor a $50,000 invoice that your customer pays in 45 days at the midpoint of the published fee range and the cost is roughly $2,250 — about 4.5% of the invoice — with the balance released when the customer pays. At the low end the cost falls near $750, and a business that factors every month can negotiate volume pricing.
Take the same $50,000 as a merchant cash advance at the midpoint factor rate of 1.32 and the business remits $66,000 over roughly nine months: about $1,690 a week, or more than $7,300 a month, whatever sales do. The MCA delivers the money a day or two faster and needs no invoices, but its cost is several times the factoring fee for the same principal.
At the midpoints: invoice factoring costs about $2,250 per invoice with $52,250 in total payback, and merchant cash advance costs about $349 per business day with $66,000 in total payback. Every figure is an estimate from published ranges, not a quote.
Payment estimator
Illustrative invoice factoring figures for $50,000 using published market ranges. Switch the product to merchant cash advance to compare. Your offer depends on underwriting.
| Scenario | Estimated payment | Total payback | Basis |
|---|---|---|---|
| Lower end of range | $750 / invoice | $50,750 | 1.0% per 30 days |
| Midpoint | $2,250 / invoice | $52,250 | 3.0% per 30 days |
| Upper end of range | $3,750 / invoice | $53,750 | 5.0% per 30 days |
Decision guide
If you invoice other businesses, factor first — it is cheaper, it scales with your sales and it does not add a daily remittance to your cash flow. Reserve the merchant cash advance for businesses without receivables, or for an urgent gap that factoring setup cannot close in time, and size it to a few months of deposits rather than the maximum offered.
Start a no-obligation reviewIndustry fit
Freight bills paid in 30 to 60 days are the classic factoring receivable, and most carriers factor rather than take advances; an MCA suits an owner-operator with card-paid local work and no invoices.
Progress invoices owed by general contractors factor well when retainage and lien rights are clear; contractors paid by homeowners on cards lean toward MCAs and working capital loans.
No invoices, high card volume: this is MCA territory. Factoring does not apply unless the restaurant also caters or wholesales on terms.
Weekly payroll against monthly client invoices is exactly what factoring solves; an MCA's daily remittance layered on payroll is the wrong shape for these businesses.
Qualification
Factors verify the invoice and the customer: a signed contract or purchase order, proof of delivery, the customer's payment history and a check that no other lender holds a lien on the receivables. Published guidelines put no minimum on time in business in many cases, and the owner's credit is secondary; concentrated customers, disputed invoices and existing UCC liens are the usual obstacles.
MCA providers read the bank and processing statements: six months in business, credit around 500 and consistent daily deposits with few negative-balance days. Existing advances are the main reason for a decline or a smaller offer, and the provider will file a UCC lien on the business's receivables, which can conflict with a later factoring arrangement.
Using both
Holding both is possible but delicate because both claim the same receivables. A factor generally needs a first lien on the invoices it buys, and an MCA provider's blanket lien can block that; disclose everything and get the liens carved out in writing before taking the second product.
The cleaner structure is to factor the B2B invoices and use a working capital loan or line, not an MCA, for the rest. If an MCA is already in place, most factors will require it to be paid off or subordinated, which the factoring advance itself can fund.
Watch-outs
Businesses with good B2B receivables often pay several times more for an advance because it was faster to arrange. Set up factoring before the crunch.
An MCA remits every business day whatever sales do. Model the remittance against the slowest month of the year, not the average.
Factors limit exposure to any one customer. A business with one large client may get a smaller facility than the invoice volume suggests.
An MCA's blanket UCC lien can block factoring later. Check the liens on file before signing either product.
Next step
AIDBIZ reviews the request, identifies which of these products the file realistically fits, and starts without a hard credit pull. There is no obligation, and no product is guaranteed.
Common questions
Almost always, when the business has factorable invoices. A fee of 1% to 5% per 30 days on a single invoice is usually a fraction of an MCA's factor rate spread over months of daily remittances.
Not for card sales, because there are no invoices. Restaurants that cater or wholesale on terms can factor those invoices; otherwise an MCA, a working capital loan or a line of credit fits.
In standard factoring, yes: the customer pays the factor directly. Some providers offer non-notification arrangements at a higher fee for businesses that prefer to keep the relationship private.
An MCA publishes same day to two business days. Factoring publishes one to three business days after the initial setup, which can take a week; individual invoices fund quickly once the account is open.
For factoring, the customer's credit matters more than yours. For an MCA, published guidelines start around 500 because deposit consistency carries the file.
Some factors and some MCA providers report; many do not. Ask, because a well-managed facility that reports helps the next application.
Under recourse factoring, the most common form, you repurchase the invoice or replace it. Non-recourse factoring shifts customer credit risk to the factor at a higher fee.
Only with the liens sorted out in writing. Both products claim the same receivables, so most factors require an existing MCA to be paid off or subordinated first.
Factoring scales with invoice volume and gets cheaper with volume; an MCA renews in fixed rounds and the cost resets each time.
AIDBIZ is a team of small-business funding specialists, not a lender. The amounts, rates, factor rates, fees, timelines and minimums on this page are published market guidelines compiled from lender and marketplace sources and are shown for comparison only. They are not offers; approval, cost, speed and amount depend on underwriting, verification and the terms of the specific funding partner. No hard credit pull is required to start a review.