Fixed vs variable
A fixed rate locks the cost; a variable rate moves with the market. Merchant cash advances and revenue-based funding use a third model: a fixed total payback with payments that can follow your sales.
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Updated October 13, 2026 · Merchant Fund Express
A fixed rate stays the same for the life of the loan, so every payment is known on day one. A variable rate is tied to an index, often the prime rate, plus a margin, so the payment can rise or fall when the index moves.
| Fixed | Variable | |
|---|---|---|
| Payment | Same every period | Can change |
| Budgeting | Easy | Harder |
| When rates fall | You keep the higher rate | You benefit |
| When rates rise | You are protected | Cost goes up |
| Common on | Term loans, equipment financing | Lines of credit, many SBA loans |
| Fixed | Variable | |
|---|---|---|
| Loan amount | $100,000 | $100,000 |
| Starting rate | 10% fixed | Prime plus 2%, starting at 9.5% |
| Rate after 6 months | 10% | 11% after a rate increase |
| Effect | Payment unchanged | Payment rises for the remaining term |
Variable can start cheaper and end more expensive. If your margin is thin, the certainty of a fixed payment is usually worth a little extra.
All figures in worked examples are illustrations of the arithmetic, not offers or quotes. Real terms depend on your file and the funder.
A merchant cash advance or revenue-based funding offer does not carry an interest rate at all. The total you repay is fixed when you sign, set by a factor rate. What can vary is how fast you repay it.
A set daily or weekly debit. The cost is fixed and the payment is predictable, like a fixed-rate loan but on a short timeline.
A holdback of card or deposit volume. Slow weeks pay less and busy weeks pay more; the total stays the same.
On fixed-debit advances, many agreements let you request an adjustment if sales drop, so the debit reflects actual revenue.
Because the payback is fixed at signing, market rate moves do not change what you owe.
See split funding vs fixed ACH and holdback percentage for the mechanics.
On the Tier 1 sheet, a line of credit starts from 1% per month and a term loan at 0% origination for files that qualify. The revenue-based tier covers newer businesses and lower scores. Both are on funding requirements.
Compare real offers with real numbers. Check your fit without affecting your credit, or apply in about five minutes.
Fixed is better for predictability; variable can be cheaper if rates fall. It depends on your margin and how long you hold the loan.
No. The total payback is fixed at signing. Only the pace of repayment can vary on percentage-of-sales structures.
Lines of credit are commonly variable, tied to an index.
Sometimes by refinancing. Compare the total cost, not just the new rate.
Same-day decision. Applying takes a few minutes and will not affect your credit score.
