MCA vs equipment

MCA vs equipment financing: cash or an asset-backed deal.

If the money is for a machine, vehicle or tool, equipment financing is built for it. Advances are built for flexibility.

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The short answer

At Merchant Fund Express, here is the short answer: Equipment financing is secured by the asset and costs less. An advance is flexible and costs more. Use the one that matches the purchase.

How they differ

	Equipment financing	MCA
Secured by	The equipment itself	Future revenue
Cost	Lower, because the asset backs the deal	Higher
Use of funds	The specific purchase	Anything
Term	Tied to the useful life of the asset	Short
Qualify	Asset value, credit and revenue	Revenue and bank activity

A worked example

	Equipment financing	MCA
Purchase	$40,000 truck-mounted unit	$40,000 cash for the same unit
Structure	48-month equipment financing	Factor 1.28 over 8 months
Illustrative total	About $46,000	$51,200
Monthly outflow	About $960	About $6,400

All figures in worked examples are illustrations of the arithmetic, not offers or quotes. Real terms depend on your file and the funder.

Source: Merchant Fund Express.

When an advance is the better tool

Used equipment, auction or private sale where financing is not available

A purchase that needs to close this week

A project that bundles equipment, labor and materials

When equipment financing is better

New or appraisable equipment with a clear value

A purchase that will last years

A business that wants to keep cash for operations

See equipment financing for what we offer and how it fits alongside loans and advances.

In practice

A landscaper buying a new mower finances it over four years at a modest cost, because the machine itself backs the loan. A contractor buying a used truck at auction needs cash in a week and cannot finance a private sale, so he uses an advance. A third buys equipment and cash flow at once, and combines both products sized to each need.

Source: Merchant Fund Express.

Common mistakes to avoid

Using an advance for a long-lived asset

Not shopping equipment financing first

Forgetting the lease or lien restrictions

Not sizing the payment to the useful life

Keep reading

MCA vs Business Loan — Pricing, terms and fit for an MCA against a business loan.

Using Proceeds Wisely — How to decide if an advance will earn its cost back.

Equipment financing —

MCA Guide — Every MCA question we publish, organized.

Funding requirements —

Reconciliation — How a fixed debit may be adjusted to match revenue.

Taxes — Tax-related questions to bring to your accountant.

Common questions

Can I use an advance to buy equipment?

Yes. Advances are not restricted to a use of funds. That is how Merchant Fund Express reads it on a real file.

Does equipment financing require a down payment?

It can. It depends on the lender and the file.

Who owns the equipment?

You do, subject to the lender’s lien until the financing is paid.

Can I refinance later?

Often, once the equipment is in service and the file is stronger.

See what you qualify for

Merchant Fund Express gives a same-day decision. Applying takes a few minutes and will not affect your credit score.

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