SBA loan vs MCA: which one should you actually go for?
Reviewed by Turan Zeynal, Managing Partner, Outset Funding Partners ·
An SBA loan is the cheapest money most small businesses can get — 10.5–13.5% APR, 5–25 year terms — but it takes 30–90 days and needs 680+ credit, 2+ years in business, and heavy documentation. An MCA funds in 24–72 hours, approves on revenue with 500+ FICO, but costs an effective 40–90% APR. Try SBA first; use MCA when speed or credit rules SBA out.
Quick facts
- SBA cost
- 10.5% – 13.5% APR
- MCA cost
- Factor 1.15 – 1.50
- SBA speed
- 30 – 90 days
- MCA speed
- 24 – 72 hours
- SBA min credit
- 680+
- MCA min credit
- 500+
- SBA min TIB
- 2+ years
- MCA min TIB
- 6 months
The 60-second answer
The gap between these two products is bigger than any other in small business funding. An SBA 7(a) loan is government-backed, capped at Prime + 2.75% or so, and can stretch to 10 or 25 years. An MCA is a private purchase of your future receivables that funds in days but costs 4–8x more.
The honest ordering: always check SBA first if you have the time and credit profile. The savings on a $150,000 deal at SBA vs MCA rates is easily $40,000–$80,000. But SBA rejects the majority of applicants, and for a real emergency (payroll gap, broken equipment, supplier discount closing tomorrow) even a "yes" from SBA is worthless if it lands in 60 days. That's the exact gap MCAs are built to close.
Pros and cons
- ✓SBA is the lowest-cost small business capital available
- ✓SBA terms up to 25 years for real estate
- ✓SBA builds business credit through predictable payments
- ✓MCA funds in 1–3 days when time is the constraint
- ✓MCA approves on revenue with FICOs down to 500
- ×SBA rejects most applicants under 680 FICO or under 2 years in business
- ×SBA takes 30–90 days — useless in a cash emergency
- ×SBA requires heavy paperwork most owners aren't ready for
- ×MCA is 4–8x more expensive per dollar than SBA
- ×MCA daily debit hits your bank account every business day
Side-by-side
| Option | When to use | Watch out for |
|---|---|---|
| Cost basis | SBA: interest / APR | MCA: factor rate, no APR |
| Repayment | SBA: fixed monthly, 5–25 yrs | MCA: daily % of sales, 3–18 mo |
| Approval speed | SBA: 30–90 days | MCA: 24–72 hours |
| Credit floor | SBA: 680+ | MCA: 500+ |
| Time in business | SBA: 2+ years typical | MCA: 6+ months |
| Collateral | SBA: usually required over $50k | MCA: none — personal guarantee only |
| Documentation | SBA: heavy — tax returns, projections, plans | MCA: light — 3 months bank statements |
Frequently asked questions
Is an SBA loan always cheaper than an MCA?
Yes, essentially always. An SBA 7(a) at 12% APR on $100,000 over 10 years costs about $72,000 in interest. An MCA at 1.35 factor on $100,000 costs $35,000 in fees but has to be repaid inside 12 months — the effective APR is roughly 65%.
Can I get an SBA loan with a 600 credit score?
Very rarely. Most SBA-preferred lenders require 680+ FICO. Some specialized SBA microloan intermediaries approve down to 620, but it's uncommon and requires strong revenue, time in business, and collateral.
Why do people take MCAs when SBA is so much cheaper?
Because most MCA applicants can't qualify for SBA. Sub-680 credit, under 2 years in business, prior bankruptcy, or a cash need inside 30 days will all disqualify from SBA. MCAs exist specifically for those cases.
Can I use an SBA loan to pay off an MCA?
Yes — SBA debt refinance is one of the most common uses of the 7(a) program once credit rebuilds. It requires that the SBA loan improve your cash flow by at least 10% versus the MCA payment.
Which one is faster if I need money this week?
MCA — not close. SBA is 30–90 days from application to funding. Even the fastest SBA Express loan is typically 2–4 weeks. If you need funds in under 10 days, SBA isn't a realistic option.
Sources
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