How Factoring Compares to Loans and Merchant Cash Advances

There are a number of small business financing options available today. Among the most popular are loans, merchant cash advances, and factoring. Smart entrepreneurs will do research to see the pros and cons of each in order to make a careful cost analysis for both short and long-term payoffs. At New Century Financial, we took a look at loans and merchant cash advances to see how they stack up with our factoring services.

Business Loans

Business loans provide capital, typically for a specific use. In exchange for capital, loans require businesses to put up collateral, take on debt, and take a hit to their credit ratings. Loans are single-use funding products, so when the capital is used up, businesses are left with a balance that must be repaid according to a schedule outlined in the agreement, and if further funding is needed, a new loan must be taken out. Interest rates on loans are also subject to rate hikes by the Fed, which are becoming more common.

Merchant Cash Advances

A merchant cash advance, or MCA, is marketed as an infusion of working capital with a flexible payment structure. No debt is placed on the balance sheet and businesses get to preserve their credit ratings. On the surface, merchant cash advances look like a much better alternative to loans, but the devil is in the details. MCAs are repaid from a small percentage of credit card sales, so if the balance is not completely repaid by the end of the terms, businesses can face very large balloon payments. Additionally, merchant cash advances have hidden fees and interest rates that are typically higher than even traditional loans.


Invoice factoring offers a number of benefits without any of the disadvantages of either loans or merchant cash advances. Factoring is structured around receivables. When businesses issue invoices with payment schedules of 30 days or longer, factoring can convert those receivables to cash within 24 hours. There is no debt involved, and businesses get to preserve their credit ratings. Because factoring is a simple exchange of receivables for cash, there is no need for collateral, and there are no payment plans, ongoing fees, or hidden penalties. The entire process is completely transparent and allows businesses to customize their factoring plan, giving them much more control than other financing programs.

New Century Financial offers the best factoring services. Businesses who use our factoring services get to choose which invoices are factored, and there are no contracts or hidden fees. Contact New Century Financial today and break away from restrictions of loans and merchant cash advances.