Invoice factoring and MCA are the best financing options that can help you to get money for your business. But the confusion that arises here is which one is better. Below are some factors that can help you make the right decision. Before going to the comparison let us understand what MCA and invoice factoring is.

Merchant Cash Advances 

Merchant cash advances (MCA) are a quick way to get cash in advance for business purposes without running into banks. Financing companies provide you with cash in advance in exchange for a percentage of sales on debit or credit cards on a daily basis. 

Basically, MCA is taking money in advance for a sale that is going to happen in the future. MCA is a good option for small businesses that need urgent advance capital.

Invoice Factoring

Invoice factoring is about selling your invoices to an invoice factoring company so that it can provide capital for your business. Receiving payments for invoices is a lengthy process, invoice factoring speeds up access to funds. An invoice factoring company looks over the strength of customers and other factors of their business, related to income. Customers have to agree on the terms and policies of payments decided by the company.

Invoice Factoring VS MCA

  • Less risky

There is risk in both Invoice factoring and MCA. In invoice factoring, the invoice factoring company gives you money based on existing invoices. It pays you the advances for the products and services that your customer owes. Whereas in MCA you get the advance cash for the future sale. The companies have all your bank details with them. If your business could not make a profit as expected and the sales downfall then it gets worse for you because MCA’s take their money back anyway.

So MCA is riskier than invoice factoring.

  • Inexpensive 

In invoice factoring, you pay the percentage that applies to your invoice. The percentage is between 2% to 4%. While in MCA the repayment is based on the interest on the amount you borrowed. The interest amount is between 20% to 50%. Also, MCA does not work like banks, they can change their interest rate amount and increase it. You will have to repay the amount in a fixed time, you can not pay it early to stop interest from increasing. The MCA is way costlier than invoice factoring.

  • Improves cash flow

Invoice factoring is designed for helping small businesses. It provides you with immediate access to advance cash. You can use this capital in any way you want. Invoice factoring helps small business owners to improve their cash flow. 

Whereas in MCA, once you are provided with cash, you will only have to use that money for the same purpose. You can not use it to pay your existing debt or to buy anything else. If you do so you may trap yourself in trouble.

  • Back office support

Once you get the MCA you only get money. The company is only concerned with providing and receiving money. While invoice factoring is not only about getting you money, factoring companies provide you with back-office support. This is the major difference between MCA and invoice factoring.

  • Faster approval

MCA ensures quick access to the fund but there may be some roadblocks while getting it. The process usually takes a week because it needs some of your bank details and business history. But in invoice factoring, you can have access to the advance cash within 24 hours. It provides faster approvals and quick funding without any strict credit requirement. Hence, invoice factoring gets approved faster.


If you are looking for a better financing option then you should prefer invoice factoring. It provides all the favorable terms and conditions that may be beneficial for a business owner. There are several ways to get fast capital for your business. Before you make a choice, do proper research and then select the suitable financing option so that you may not regret it later.

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