MCA vs invoice factoring: which one really costs less?
Reviewed by Turan Zeynal, Managing Partner, Outset Funding Partners ·
An MCA advances cash against your future card sales — factor 1.15–1.50, daily debit, 500+ FICO. Invoice factoring sells your existing unpaid B2B invoices at a discount (1–5% per 30 days) — the factor collects from your customer. Factoring is dramatically cheaper if you have real B2B invoices; MCAs win for B2C/retail with card revenue but no invoices.
Quick facts
- MCA cost
- Factor 1.15 – 1.50
- Factoring cost
- 1% – 5% per 30 days
- MCA speed
- 24 – 72 hours
- Factoring speed
- 1 – 3 days
- MCA credit
- 500+ FICO
- Factoring credit
- Customer's credit matters more
- MCA best for
- B2C, retail, card revenue
- Factoring best for
- B2B, net-30/60 invoices
The 60-second answer
These two products look similar — both are ways to get cash today against money you expect to receive later — but they work on completely different receivables and cost completely different amounts.
An MCA advances a lump sum against your future card sales you haven't made yet. Invoice factoring advances cash against invoices you've already issued to real B2B customers. Because factoring is secured by a specific unpaid invoice from a creditworthy customer, it's dramatically cheaper — often 5–10x less than an MCA for the same net cash. But it only works if you actually have unpaid B2B invoices. Restaurants, retail, and services that get paid at the point of sale can't factor because there's nothing to factor.
Pros and cons
- ✓Factoring is dramatically cheaper than an MCA on a per-dollar basis
- ✓Factoring approval leans on your customer's credit, not yours
- ✓Factoring can grow with your sales — every new invoice can be factored
- ✓MCA works for businesses without B2B invoices (restaurants, retail, services)
- ✓MCA is faster and simpler — no invoice review, no notification
- ×MCA is 5–10x more expensive per dollar than factoring for equivalent access
- ×MCA daily debit locks up card revenue until fully repaid
- ×Factoring only works if you have real, verifiable B2B invoices
- ×Factoring usually notifies your customer of the assignment
- ×Factoring recourse/non-recourse structure can shift bad debt back to you
Side-by-side
| Option | When to use | Watch out for |
|---|---|---|
| What backs it | MCA: future card sales | Factoring: existing B2B invoices |
| Whose credit matters | MCA: business owner | Factoring: your customer's |
| Cost | MCA: 15–50% of advance | Factoring: 1–5% per 30 days |
| Cash advance rate | MCA: 100% up front | Factoring: 70–90% up front, rest on collection |
| Repayment | MCA: daily debit | Factoring: customer pays the factor directly |
| Best for | MCA: B2C, retail, card-heavy revenue | Factoring: B2B, net-30/60 terms |
| Customer notification | MCA: private | Factoring: customer usually notified (except non-notification) |
Frequently asked questions
Is invoice factoring cheaper than an MCA?
Yes — dramatically. Factoring a $100,000 invoice at 3% for 30 days costs $3,000. An MCA for the same $100,000 at a 1.35 factor costs $35,000. If you have real B2B invoices, factoring is almost always the better choice.
Can I use invoice factoring if I run a restaurant or retail store?
No. Factoring requires B2B invoices — commercial customers on net-30 or net-60 terms. A restaurant collects at the point of sale, so there's no unpaid invoice to factor against. An MCA is designed exactly for that revenue shape.
Does the factor talk to my customers?
In most factoring arrangements (called 'notification factoring'), yes — the factor sends a notice of assignment and collects directly from your customer. Some factors offer 'non-notification' arrangements at a higher cost.
Which one hurts my credit more?
Neither hurts as long as payments are made. MCA funders typically do a soft pull. Factors usually check your credit but weight it far less than your customer's payment history — a strong-customer roster can compensate for weak owner credit.
Can I use both?
Yes — factoring your invoices and taking an MCA on your card revenue are compatible in principle. But stacking multiple advances against overlapping revenue streams gets dangerous quickly; get advice before doing it.
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