Comparison

Merchant cash advance vs equipment financing: the differences that decide it.

A neutral side-by-side, with the arithmetic, so you can pick the structure that fits.

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The short version

If you are buying a machine, you have two broad choices: finance the equipment itself, or take cash and buy it outright. They behave very differently when something goes wrong.

What secures itEquipment financing: the equipment itself. Advance: future receivables, no specific asset.

Typical termEquipment financing: years, matched to asset life. Advance: months.

Down paymentEquipment financing: often required. Advance: none.

Rate and costEquipment financing: usually the cheapest of the options. Advance: higher in dollars.

SpeedEquipment financing: a few days to weeks. Advance: often same day.

FlexibilityEquipment financing: only for the specified asset. Advance: any business use.

If the asset failsEquipment financing: payments continue. Advance: payments continue too, but you can redeploy the cash.

A worked example

Illustrative arithmetic

A auto repair shop depositing about $61,000 a month asks for $28,000 for a lift and diagnostic tools. At a 1.25 factor the payback is $35,000, a cost of $7,000. Over roughly 6 months that is about $278 per business day, or close to 10% of monthly deposits.

Total payback on the advance: $35,000.
Cost: $7,000.
Roughly $278 per business day, or about 10% of monthly deposits.

Every figure on this page is illustrative arithmetic in Canadian dollars. It is not an offer, a quote or a promise of approval.

How to decide

If the purchase is a single major asset and you can wait, equipment financing is usually cheaper.
If you need installation next week or the vendor offers a time-limited price, an advance can capture the discount.
If the asset is cheap relative to deposits, paying cash through an advance may be simpler.
If you will need working capital as well, an advance covers both in one request.

Where people go wrong

Ignoring a vendor's own financing offer.
Taking a long equipment term on an asset that will not last that long.
Forgetting installation, training and permits when sizing the request.

Common questions

Which is cheaper?

Equipment financing generally is, because the equipment is the security.

Can I finance used equipment?

Often yes, though terms differ. Ask the vendor.

What if I need working capital too?

An advance can cover equipment and working capital together.