Term loan vs RBF
Both put cash in your account. The contracts underneath are different, and the difference shows up in how payments behave, what early payoff does and what you owe if sales drop.
✓ Checking what you qualify for does not affect your credit score.
Updated October 13, 2026 · Merchant Fund Express
A term loan is debt: you borrow a principal amount and repay it with interest on a fixed schedule. Revenue-based financing, including a merchant cash advance, is usually structured as a purchase of a share of future receivables: you receive cash now and remit a fixed total amount from future sales. The loan is priced with an interest rate on a declining balance. The purchase is priced with a factor applied once, at funding. That single difference drives most of the others.
| Term loan | Revenue-based financing | |
|---|---|---|
| What it is | A loan | A purchase of future receivables |
| Pricing | Interest rate on the balance | Factor rate on the amount funded |
| Payment | Fixed installment, usually monthly or weekly | Daily or weekly remittance, fixed or tied to sales |
| If sales drop | Payment stays the same | Reconciliation may adjust a fixed remittance toward the agreed share, if the contract allows |
| Early payoff | Usually saves remaining interest unless there is a prepayment penalty | Total is fixed; savings only if the contract offers an early payoff discount |
| Typical file | Longer history, stronger credit | Shorter history, lower scores, existing positions |
| Guarantee and lien | Often a personal guarantee and a lien on business assets | Often a personal guarantee of performance and a UCC filing |
A business needs $50,000 in hand for 12 months.
| Term loan | Revenue-based | |
|---|---|---|
| Amount received | $50,000 | $50,000 |
| Pricing | 1.5% per month interest, 0% origination | Factor 1.30 |
| Payment | $4,584 a month for 12 months | About $1,250 a week for 52 weeks |
| Total repaid | About $55,008 | $65,000 |
| Cost of the money | About $5,008 | $15,000 |
| Pay off after 6 months | Remaining principal only (no penalty assumed) | Remaining balance of the $65,000 unless a discount applies |
On these assumptions the loan is far cheaper. The catch is the file: our published Tier 1 for a term loan asks for 3+ years in business, a 650+ FICO and $25,000 a month in revenue. The revenue-based tier starts at 6 months, 600+ and $60,000 in verifiable revenue. Many owners compare the two only to find one is not open to them yet.
All figures in worked examples are illustrations of the arithmetic, not offers or quotes. Real terms depend on your file and the funder.
A business with a long track record, clean statements and a use that pays back over a year or more, where a fixed payment is easy to plan around.
A younger business, a credit score in the 600s, uneven sales or a file that already carries a position, where speed and access matter more than the lowest price.
A business that cannot show the repayment in its current deposits. Borrowing to cover a permanent shortfall makes the next month harder.
A file that clears Tier 1 can still compare a revenue-based offer for speed. Compare on total repaid and payment size.
Check which tier your file meets on funding requirements, compare costs with the term loan payment calculator and the factor rate calculator, then apply and see both where they are available.
Usually not. It is typically structured as a purchase of future receivables with a fixed total amount. Read the agreement to see how your specific contract is written.
For a file that qualifies for both, a term loan is usually cheaper in total dollars. Revenue-based financing costs more and opens to more files.
A term loan usually saves remaining interest unless a penalty applies. A revenue-based contract saves money only if it includes an early payoff discount.
A loan payment stays fixed. Some revenue-based contracts allow reconciliation of a fixed remittance toward the agreed share of sales. Check the clause before you sign.
Same-day decision. Applying takes a few minutes and will not affect your credit score.
