Comparisons
Merchant cash advance versus the SBA 7(a) loan
On $250,000, an advance costs $65,000 in ten months and an SBA 7(a) costs $65,000 in interest by month 30. Renew the advance twice and the gap becomes three to one.
The short version. If you have 30 to 90 days, two years of filed tax returns, and a credit file in the high 600s, the SBA 7(a) is better and it is not remotely close. The advance exists for the file that does not have those three things, or for the week where 60 days might as well be 60 years. These are not competing products. They are products for different businesses on different timelines.
We are going to do something unusual on this page and price the SBA loan as the expensive option for a moment, because on total dollars over ten years it genuinely is. Then we will show you why that framing is wrong, and where the honest break even sits. Both halves matter if you are choosing between these two this month.
The same $250,000, priced both ways
Assume a business with $400,000 a month in deposits, four years in business, and an owner at 700. That file can get both. The advance prices at a 1.26 factor over about ten months at that size. The SBA 7(a) prices as a ten year working capital loan at roughly Prime plus 3, call it 10.5 percent, plus a guaranty fee that typically runs around 3 percent of the guaranteed portion.
| Merchant cash advance | SBA 7(a) loan | |
|---|---|---|
| Pricing | 1.26 factor rate | About 10.5 percent, Prime plus 3 |
| Term | About 10 months | 10 years |
| Payment | About $1,432 every business day | $3,373.50 a month |
| Cash out per month | About $31,500 | $3,374 |
| Total repaid | $315,000 | $404,820 |
| Cost of capital | $65,000 | About $163,000 including fees |
| Up front fees | Usually inside the factor | Guaranty fee about $5,625 |
| Time to funding | 24 to 48 hours | 30 to 90 days |
| Collateral | Blanket UCC | All available business assets, often a lien on real estate |
| Documents | 3 months of bank statements | Returns, financials, SBA forms, and more |
| Typical credit floor | Low 500s | High 600s |
On raw total dollars the advance costs $65,000 and the SBA loan costs about $163,000. That is a real number and we are not going to hide it. It is also almost meaningless, because the SBA borrower had the money for ten years and the advance borrower had it for ten months.
The break even, stated plainly
Price them per month of capital held and the picture inverts. The advance costs $6,500 for each month you hold the money. The SBA loan costs about $1,290 a month against a balance that is shrinking the entire time. Cumulative interest on the SBA loan, counting the guaranty fee, passes the advance's $65,000 total at roughly month 30.
So the clean statement is this. If you genuinely need the money for less than about 30 months, and you actually retire the advance instead of renewing it, the advance costs less in total dollars. Past 30 months, or the first time you renew, the SBA loan wins decisively. By month 30 the SBA borrower has also paid down about $41,000 of principal, which the advance borrower has not, so even the 30 month figure flatters the advance.
Now the number that matters more than any of it. Almost nobody takes one advance. Renew a 1.26 advance every ten months across the same 30 months and you have paid roughly $195,000 in cost of capital, against about $66,000 of SBA interest over the identical window. That is three to one, on the same business, in the same three years. The advance is not expensive because of the factor rate. It is expensive because of the habit.
Who each one is actually for
- The SBA 7(a) is for you if you have two years of filed returns showing profit, a personal FICO in the high 600s, no unresolved tax liens, and a use of funds with a long payback: an acquisition, a build out, a hire, a real expansion. It is also the only one of the two that will lend you $250,000 at a payment a normal business can carry.
- The advance is for you if the deadline is measured in days, if your returns show a loss even though the bank account does not, if you have under two years in business, or if you have a credit event that will not survive an SBA review. All credit profiles are accepted on the advance side, which is the entire reason it exists.
- Run them in sequence, not in parallel. Take the advance for the emergency, retire it, spend six clean months rebuilding the file, then run the SBA application from a position that will actually approve.
- Neither is the answer if the business is losing money every month. An SBA loan takes ten years to make that worse and an advance takes ten months. See when not to borrow.
What the SBA process actually costs you that the rate does not show
The 7(a) is cheap money with an expensive process. Expect 30 to 90 days, a document list that runs past twenty items, and a lender who will ask for things you have never heard of. You will produce three years of business and personal returns, a debt schedule, interim financials, a personal financial statement, and SBA Form 1919. Every owner at 20 percent or more signs a personal guarantee. The lender will take a lien on all available business assets and, if you have equity in real estate, often on that too.
None of that is a reason to skip it. It is a reason to start it before you need it. The single most common mistake we see is a business that could have qualified in March applying in September with a fire already burning, then taking an advance because the SBA timeline no longer fits. The product you can qualify for in a crisis is never the cheap one. Read how to prepare for underwriting and start the file while the business is calm.
What we do with this
Exp Capital Solutions is a broker, not a lender. We do not fund advances and we do not originate SBA loans, and we do not set anyone's pricing. What we do is read your file honestly and tell you which of these two you can actually get today, and what would have to change to get the other one. If your file is close to SBA eligible we will say so, and we will tell you it is worth waiting, even though an advance placed today pays us far more than telling you to wait. Then we show every offer side by side with total payback, payment size, and payment frequency spelled out in the same units.