Two business funding products, same "get you $100,000" headline, completely different math underneath. Here's how to tell which one you should actually take.
The SBA 7(a) loan, briefly
The Small Business Administration doesn't lend money. It guarantees loans made by banks. The bank takes less risk because the SBA guarantees 75–85% of the loan. In exchange, the bank charges you a rate capped by the SBA.
- Rate: Prime + 2.75% – Prime + 4.75%, depending on loan size and term. At today's Prime (around 7.5%), that's roughly 10.25% – 12.25% APR.
- Size: $25K – $5M.
- Term: Up to 10 years (working capital), 25 years (real estate).
- Time to fund: 30–90 days.
- Paperwork: tax returns, financials, business plan, personal financial statement, debt schedule. Several hundred pages typical.
- Personal guarantee: required for any owner with 20%+.
The merchant cash advance (MCA), briefly
An MCA is NOT a loan. It's a purchase of future receivables. The funder gives you cash today and buys the right to deduct a fixed percentage of your daily sales (ACH debit or split credit card processing) until they've collected an agreed-upon amount.
- Cost: factor rate of 1.15 – 1.49. A "1.30 factor on $100K" means you pay back $130,000 total.
- Size: $5K – $500K.
- Term: typically 4–18 months.
- Time to fund: 24 – 72 hours.
- Paperwork: 3 months of bank statements, driver's license, voided check.
- Personal guarantee: usually confession of judgment + personal guarantee.
The real APR on an MCA
A factor rate of 1.30 sounds like 30% interest. It isn't. The $100K / $130K / 10-month MCA works out to an APR of approximately 60–70%, because you're paying back over such a short period on a fully amortizing basis.
Shorter MCAs are worse, not better. A 6-month MCA with a 1.20 factor rate runs 80%+ APR. A 4-month MCA with a 1.15 factor rate runs over 100% APR.
Shorter term → higher APR, not lower. The marketing uses factor rate because factor rate hides the number that would scare you off.
When each one is right
SBA 7(a) is the right call when:
- You need $100K+.
- You have time — you're planning an expansion 60 days out, buying equipment, buying a building.
- Your financials are clean: profitable, tax returns show real income, debt is manageable.
- Your personal FICO is 680+.
- You're willing to assemble the paperwork and work with a bank's loan officer for 2 months.
MCA is the right call when:
- You need money this week to seize an opportunity that will repay the cost multiple times over — a bulk inventory buy at a discount, an emergency equipment fix that gets your biggest customer back online, a short-term contract that needs upfront capital.
- You know the ROI math on what you're funding and it comfortably clears a 70% APR hurdle.
- You can't qualify for anything else (low FICO, short time in business, prior bankruptcy).
MCA is almost always wrong when:
- You're using it to cover a shortfall (payroll, rent, taxes). MCA won't fix cash flow — it accelerates it. If you can't afford the thing now, you certainly can't afford it plus the MCA's 10–20% weekly debits.
- You already have an MCA. Stacking MCAs is the fastest path to default.
- You have 30+ days. That's enough time to apply for a business line of credit or SBA Express (~45 days).
The middle option nobody mentions
Business line of credit, from a fintech lender (Bluevine, OnDeck, Fundbox) or a bank. Funds in 1–5 days, true APR of 15–30%, revolving so you only pay interest on what you draw. For most owners who don't qualify for SBA but shouldn't touch an MCA, this is the right landing spot. It's also the most common offer our marketplace routes to.