Business Line of Credit vs. MCA: Side-by-Side Comparison
| Feature | Bank Business LOC | Fintech LOC (Kabbage/Bluevine) | MCA (Merchant Cash Advance) |
|---|---|---|---|
| Min. FICO | 680+ | 625+ | 500+ |
| Time in business | 2+ years | 1-2 years | 4+ months |
| Bank decline OK | N/A | Usually no | Yes |
| Collateral required | Often yes | No | No |
| Funding speed | 2-8 weeks | 1-5 days | 1-3 days (same-day possible) |
| Monthly revenue req. | Varies (usually $15K+) | $10K+/mo | $4K–$6K+/mo |
| Cost structure | Interest on draws (8-12% APR) | 2-3%/month on draws (24-36% APR) | Fixed factor rate (know total before signing) |
| Repayment | Monthly interest payment | Weekly or monthly | % of daily deposits — adjusts with revenue |
When to Pursue a Business Line of Credit
A business line of credit is the right tool when you meet the requirements and need revolving flexibility — the ability to draw, repay, and draw again without applying each time. It is the cheapest form of business credit if you qualify.
You should pursue a business LOC if:
- Credit score is 680+ with consistent history
- 2+ years in business with profitable tax returns
- You need ongoing revolving access, not a one-time lump sum
- You can wait 2-8 weeks for underwriting and approval
- You want the lowest possible cost of capital
When MCA Is the Better Fit
For the majority of small business owners — especially those who've been declined by banks, have credit under 680, or are under 2 years in business — a merchant cash advance is the most realistic path to working capital.
Credit below 680
MCA minimum is 500 FICO. Revenue matters more than credit score.
Need capital fast
MCA decision in 2-4 hours. Funds in 1-3 days. LOC takes 2-8 weeks.
Bank already declined
Bank decline doesn't affect MCA eligibility — different underwriting model.
Under 2 years in business
MCA requires 4+ months. No long business history needed.
Check Your MCA Eligibility — 2 Minutes
500 FICO minimum · Bank declines OK · No collateral required
Business Line of Credit FAQ
What is a business line of credit?
A business line of credit (LOC) is a revolving credit facility that lets you borrow up to a set limit, repay, and borrow again. Unlike a term loan, you only pay interest on what you draw. LOCs are ideal for managing cash flow gaps and recurring short-term needs. However, they typically require 680+ FICO, 2+ years in business, and strong financial statements — disqualifying most small businesses with credit below 680.
What is the difference between a business line of credit and a merchant cash advance?
A business line of credit is a revolving credit product with an interest rate, typically requiring 680+ FICO, 2+ years in business, and strong financials. It functions like a credit card for the business. A merchant cash advance (MCA) provides a lump sum of capital repaid as a percentage of daily revenue. MCA requires only 500 FICO and 4+ months in business — significantly more accessible than a business LOC, and funded in 1-3 days vs. weeks for a bank LOC.
Can I get a business line of credit with bad credit?
Traditional bank lines of credit require 680+ FICO. If your credit score is below 680, a merchant cash advance is typically the most accessible alternative — 500 FICO minimum, approved on monthly revenue, funded in 1-3 days. Some fintech lenders offer credit lines to 600+ FICO applicants, but these usually carry higher fees than advertised and require longer business history.
How much does a business line of credit cost?
Bank business line of credit: typically Prime rate + 1-3% (roughly 8-12% APR currently). Fintech business LOC (Kabbage, BlueVine): 2-3% monthly draw fee (roughly 24-36% APR). Merchant cash advance: factor rate of 1.10-1.50 on total advance (equivalent to 40-150% APR depending on repayment speed, but total cost is fixed — you know exactly what you will repay before signing).
How long does it take to get approved for a business line of credit?
Bank business LOC: 2-4 weeks minimum; often 30-60 days for full underwriting. Fintech business LOC: 1-5 days, but typically requires 1-2 years in business and strong revenue. Merchant cash advance (if you qualify for an LOC alternative): 2-4 hours for a decision, funded in 1-3 business days.
Related Guides
Understanding Business Line of Credit vs. MCA — Deep Dive
A business line of credit (LOC) is revolving credit — you draw what you need, repay it, and the availability replenishes. Interest accrues only on the drawn amount. An MCA is a lump-sum advance repaid via daily holdback over a fixed term. The fundamental difference: a LOC has variable cost based on how much you draw and for how long; an MCA has a fixed total cost determined by the factor rate regardless of early payoff (unless a prepayment discount is negotiated). For businesses that need to draw capital repeatedly in small amounts, a LOC is often cheaper. For businesses that need one large injection and want funds in 24–72 hours without strong credit, MCA wins.
- Cost Structure
- LOC: interest on drawn balance only (typically 8–25% APR). MCA: flat factor rate on full advance (1.15–1.50×, equivalent to 40–150%+ APR depending on term).
- Credit Requirement
- Bank LOC: 680+ FICO typically required. Online LOC (Bluevine, Fundbox): 625–650+. MCA: 500+ FICO minimum.
- Speed to Funds
- Bank LOC: 2–8 weeks. Online LOC: 1–5 business days. MCA: 24–72 hours.
- Revolving vs. Term
- LOC: revolving — draw, repay, redraw as needed. MCA: single term — advance is funded once and paid down via holdback. No revolving structure.
- Ideal Use
- LOC: ongoing operational expenses, inventory cycles, predictable short-term cash gaps. MCA: large one-time capital need (equipment, expansion, seasonal ramp) when timing is urgent or credit disqualifies LOC.
- Can I get both a business line of credit and an MCA at the same time?
- Technically yes — LOC and MCA are different products and some businesses carry both. However, the combined daily obligations (LOC monthly payment + MCA holdback) must be sustainable relative to your monthly revenue. Underwriters on both sides will see the other obligation. Most MCA funders require disclosure of all existing debt, including active credit lines. Running both simultaneously is not stacking (which refers to multiple MCAs) but does increase total repayment burden.
- Is an MCA or line of credit better for a restaurant?
- For most independent restaurants, MCA is more accessible (banks rarely offer LOC to restaurants), faster, and better suited to the revenue pattern. Restaurant card sales volume qualifies easily for MCA, and the daily holdback model means slow December payments and high July payments — matching the natural revenue cycle. An online LOC (Bluevine, Fundbox) can work for restaurants with 650+ FICO and 2+ years in business, but the application process is longer and the approval rate lower than MCA.
- What happens to my MCA if I open a line of credit later?
- Nothing automatically. Opening a new LOC after an MCA is funded does not affect the MCA repayment schedule. However, if your MCA contract has a negative pledge covenant (prohibiting additional encumbrances on receivables), a LOC secured by future receivables could technically trigger a default. Read your MCA contract's covenants section carefully before opening new credit lines while an MCA is active.