When business owners need working capital, two common solutions come up: a Line of Credit (LOC) and a Merchant Cash Advance (MCA). While both can provide access to cash, they work very differently and knowing the difference can help you choose the best option for your business.
At Spring Advance, we specialize in helping small businesses understand funding options. Here's a simple breakdown.
What is a Line of Credit (LOC)?
A Business Line of Credit is a revolving pool of funds you can draw from as needed.
- Works similar to a credit card, but for business expenses.
- You only pay interest on the amount you use.
- Can be reused as long as you make payments and stay within the limit.
- Best for businesses that need flexible, ongoing access to capital.
What is a Merchant Cash Advance (MCA)?
A Merchant Cash Advance is an advance against your future sales.
- You receive a lump sum upfront.
- Repayments are made through a fixed percentage of daily or weekly sales.
- Provides fast funding with less paperwork than banks.
- Best for businesses that need quick cash for immediate opportunities or expenses.
LOC vs. MCA: Key Differences
- LOC = Ongoing access to flexible credit.
- MCA = Quick lump sum of working capital.
Both can support your business but the right choice depends on your situation.
Which is Right for You?
- Choose a LOC if your business has steady revenue and you want long-term flexibility.
- Choose an MCA if you need fast, one-time capital and prefer repayments tied to sales.
Final Takeaway
Think of it like this:
- LOC = Flexibility for the long term.
- MCA = Speed for immediate needs.
At Spring Advance, we provide tailored funding solutions including MCAs and other programs, so business owners can focus on growth.