Quick answer
A merchant cash advance is repaid as a share of your daily card sales, with one fixed fee that doesn't shrink if you repay early. A business loan has set repayments, and interest usually runs on the falling balance. The advance suits card-heavy businesses with seasonal takings that want repayments to flex. A loan suits planned spending, non-card revenue and anyone likely to pay out early.
Key points
- A merchant cash advance charges one fixed fee, so the faster you repay, the dearer it is in effect
- Flexible repayments usually come with floors, such as a minimum amount every 60 days and a maximum term
- Business loans have fixed repayments, but interest typically falls as the balance does
- Advances are mostly offered by payment providers to their own merchants, by invitation
- Compare total dollars repaid over the time you'll realistically take, not the headline fee
- MCA repayments
- Share of daily card sales
- Loan repayments
- Fixed daily, weekly or monthly
- MCA pricing
- One fixed fee, set upfront
- Unsecured loans (our range)
- Typically $5k to $500k
It’s a quiet Monday afternoon and the owner of a busy café opens her payment app to find a pre-approved offer: $40,000, one fixed fee, repaid automatically from card takings. The same week, an online lender quotes a $40,000 unsecured loan over twelve months with weekly repayments. Both could pay for the new espresso machine and the outdoor seating. Which is the better deal hinges mostly on one thing: how soon she thinks it’ll be cleared.
What’s the real difference?
A merchant cash advance puts cash in your account now; in return, the provider keeps an agreed slice of every day’s card takings, deducted daily until you’ve repaid the advance plus a fixed fee. There’s no interest rate and no fixed instalment: big trading days pay off more, quiet days less.
A business loan gives you a lump sum repaid in fixed instalments over a set term, usually daily, weekly or monthly. With most term loans, interest accrues on the outstanding balance, so the cost falls as you pay it down.
That distinction, a fee fixed at the start versus a cost that tracks the balance, is what decides which one is cheaper for you.
Side-by-side comparison
| Merchant cash advance | Business loan | |
|---|---|---|
| How it’s repaid | A percentage of daily card sales | Fixed instalments |
| Pricing | One fixed fee, set upfront | Interest on what’s still owed, plus fees |
| Paying off ahead of schedule | Generally saves nothing, as the total is locked in | Often reduces interest, subject to any early repayment fee |
| When sales drop | Repayments fall too, down to a contractual floor | Repayments stay the same |
| Who offers it | Mostly payment providers, to their own merchants | Banks, fintechs, non-banks |
| Revenue it suits | Card-heavy, daily takings | Any revenue, including invoices and cash |
| Typical term | Open-ended, within a maximum, often up to 18 months | Fixed, from a few months to several years |
| Speed | Often next business day for pre-approved offers | Same day to a couple of weeks, depending on lender |
| Security | Usually unsecured for smaller amounts; guarantees common | Unsecured or secured, depending on amount |
Why does a fixed fee make fast repayment expensive?
Say the café’s advance is $40,000 with a $6,000 fee, so $46,000 is repaid in total.
- Repaid in 6 months: the business has used an average of about $20,000 for six months, and paid $6,000 for it.
- Repaid in 12 months: it has used about $20,000 on average for twelve months, and still paid $6,000.
Same dollars, twice the time with the money. In effect the six-month version costs twice as much per month of use. That’s why a strong trading season, normally good news, makes a merchant cash advance more expensive in relative terms. Tyro, for one, says plainly on its website that its loan fee remains the same if you pay early. Square says prepayments don’t change the total you owe.
A loan works the other way round. With interest calculated on a reducing balance, paying it off early generally means paying less, although some lenders charge an early repayment fee or a minimum interest amount. Our factor rate calculator converts a fixed fee into something you can line up against loan quotes in the loan cost comparison calculator.
How flexible are “flexible” repayments, really?
More than a loan, but less than the marketing suggests. As at October 2026:
- Square says at least one-eighteenth of the starting balance must be repaid every 60 days regardless of sales, and the whole amount within 18 months. Offers range from $100 to $250k, are by invitation based on processing history, and amounts over $75k need a security interest in business assets.
- Tyro lets eligible merchants nominate a share of daily takings (its calculator shows 8% to 30%) on unsecured amounts up to $400k, subject to minimum repayment amounts. A Tyro transaction account and a personal guarantee are required.
So a quiet month is absorbed, but a long downturn can still lead to a catch-up payment. Read the minimum-payment clause before accepting.
When does a merchant cash advance win?
- Takings swing with the seasons. A ski-season café, a coastal tour operator or a gift store whose December carries the whole year. Deductions that shrink in the off-season can be worth the premium.
- You want no fixed commitment on quiet days. For a venue that can lose a week to rain, avoiding a fixed debit on a dead day has real value.
- The offer is pre-approved and the need is small. For a few thousand dollars of stock or a minor repair, the convenience can outweigh the cost.
- You’d struggle to document a loan. Providers assess from your processing history, so up-to-date financials matter less.
When does a business loan win?
- You expect to repay early. If a strong season will clear it in months, a reducing-balance loan generally costs fewer dollars.
- Much of your revenue isn’t card sales. Invoice, bank-transfer or cash revenue doesn’t count toward an advance.
- You need more than the provider will offer. Unsecured loans from fintech lenders such as Prospa or Moula are sized on total turnover, and property-secured loans go much higher.
- You want a predictable budget. Fixed repayments are easier to forecast, and a longer term can lower the weekly outlay.
- You might change payment provider. Most advances are tied to the provider’s terminal and must be cleared before you leave.
Two cards on the table and not sure which to play? Send us both offers and we’ll explain the dollar difference. A simple enquiry never shows up as a credit check.
Watch for stacking
Payment-app offers are easy to accept, and some owners end up with an advance, an online loan and a line of credit all deducting at once. Each one made sense alone; together they can swallow the day’s takings before suppliers are paid. If that’s happening, read our guide on business loans when you already have online loans, and see how owners approach paying out a merchant cash advance by refinancing into one longer facility.
Decision checklist
- What share of your revenue actually comes through the card terminal?
- How quickly will you realistically repay: three months, six, twelve?
- What is the minimum payment per period, and the maximum term?
- What would a term loan of the same amount cost in total dollars, repaid on your expected timeline?
- Does either contract restrict changing payment provider or taking other finance?
- Is a director’s guarantee or security interest required?
Get a straight comparison before you tap “accept”
A pre-approved offer in your payment app can be the right answer, and sometimes it’s the dearest money you’ll ever borrow. We’ll help you see which, and what else is available for a business like yours, including unsecured and property-backed options if you need a larger sum. Allow about a minute for the enquiry, and rest easy: it doesn’t pull your credit report. We won’t scatter your details among dozens of lenders. Someone with real lending experience works through your answers, then calls. Put in your real monthly card takings and total turnover, because accurate numbers are what let us match the right product first go.
Frequently asked questions
Is a merchant cash advance cheaper than a business loan?
It depends on how fast you repay. Because the advance has one fixed fee, repaying in four months costs the same dollars as repaying in twelve, which makes a quick payback relatively expensive. A loan charging interest on a reducing balance often costs fewer dollars if you can manage the fixed repayments.
Can I repay a merchant cash advance early to save money?
Usually not. Most providers let you prepay, but the total you owe stays the same. Tyro, for example, states that the loan fee remains the same if you repay early. With many term loans, early payout can reduce interest, though some charge an early repayment fee, so check the contract.
What happens if my sales drop on a merchant cash advance?
Your daily deduction falls with your takings, which is the main appeal. But most contracts set a minimum, such as Square's requirement to repay at least one-eighteenth of the starting balance every 60 days, plus a deadline for the whole amount. A long slump can still trigger a catch-up payment.
Do I need security for either?
Smaller advances and loans are often unsecured, though directors usually give a personal guarantee. Larger amounts may need a security interest over business assets, registered on the PPSR. Square, for example, says its loans above $75k need a security interest in business assets.
Can I get a merchant cash advance if I don't use the provider's terminal?
Some independent funders lend against card takings through any terminal, but most Australian advances now come from the payment provider you already use, which deducts repayments from your settlements. If you switch providers, check whether the advance must be paid out first.