A merchant cash advance and revenue-based financing are close cousins: in the form most small businesses meet them, both are a purchase of future receivables, not a loan. The real differences are in how you repay. An advance is usually priced by a factor rate and collected daily or weekly from card sales or bank receipts; revenue-based financing takes a set share of what the business brings in, usually month by month, over a longer horizon.
Is either one a loan?
Usually not. A merchant cash advance is a purchase: the funder buys a slice of your future sales at a discount and pays you a lump sum now. NerdWallet’s merchant cash advance explainer (updated May 2026) calls it “an advance of cash you typically repay using a percentage of future credit card sales.” Revenue-based financing is most often built the same way, as a purchase of a share of future revenue, though some programs are written as loans. The contract, not the label, tells you which you hold.
That shape matters for two reasons. First, there is no interest rate in the bank sense: the cost is a fixed dollar amount set when you sign, and it doesn’t shrink as the balance falls. Second, a purchase of receivables lands in the same filing system as a secured loan. Article 9 of the Uniform Commercial Code, as published by Cornell’s Legal Information Institute, applies to “a sale of accounts, chattel paper, payment intangibles, or promissory notes,” so a UCC filing after an advance is normal, not a warning sign.
How each one is repaid
An advance is repaid from receipts as they arrive; revenue-based financing is repaid as a percentage of revenue over a longer stretch. On paper that sounds similar. Week to week, it isn’t.
The merchant cash advance
The classic version is a card split: your processor holds back a set percentage of each day’s card sales and sends it to the funder. NerdWallet puts the typical holdback at 5% to 20% of daily card sales. The newer version skips the processor and pulls a fixed amount from your bank account daily or weekly by ACH, an automatic bank debit. Both are priced by a factor rate: a decimal multiplied against the advance to give the total you’ll pay back. NerdWallet puts typical factor rates at 1.1 to 1.5, with equivalent APRs it estimates at 40% to 350%; the guide to factor rates vs. interest rates walks through that math.
Revenue-based financing
Revenue-based financing is repaid as a share of what the business actually brings in. The percentage is set up front, before you sign, and the remittance runs heavier in strong months and lighter in slow ones. NerdWallet’s revenue-based financing explainer (updated March 2026) describes the lender collecting “a fixed percentage of your monthly revenue” until “the agreed-upon total is repaid,” and notes that many of these agreements have no set end date, because the payment moves with revenue. The total is still fixed at signing; what changes is how long it takes to get there.
| Merchant cash advance | Revenue-based financing | |
|---|---|---|
| What it is | A purchase of a set amount of your future card or bank receipts, paid as a lump sum now | A purchase of a share of your future revenue (some programs are written as loans), paid as a lump sum now |
| How you repay | A holdback from daily card sales, or a fixed daily or weekly bank debit | A set percentage of revenue, usually remitted monthly, until the agreed total is reached |
| Slow month | Card split: the remittance falls and the term stretches. Fixed debit: the same amount comes out unless the contract has a true-up clause | The remittance shrinks with revenue; you finish later and the total does not change |
| Typical horizon | Shorter; it ends when the purchased receipts are collected | Longer; it runs until the share adds up to the agreed total |
| Priced by | A factor rate | A set share of revenue and an agreed total, sometimes called a repayment cap |
| What the underwriter reads | Card processing statements, or bank statements for the fixed-debit version | Total deposits across the bank statements, and how steady they are |
What happens in a slow month?
A slow month is where the two products stop looking alike. With a card-split advance, less card revenue means a smaller holdback, so the advance takes longer to clear. With a fixed-debit advance, nothing changes on the funder’s side: the same amount leaves on the same schedule, and a run of weak weeks can squeeze cash badly. Some contracts include a true-up clause that lets the debit be reset to match actual receipts, and New York’s disclosure rule requires the offer to explain any such mechanism and point to where in the contract it lives. No clause, no flex.
Revenue-based financing is built for the slow month. The share is a percentage of revenue, so when revenue drops the remittance drops with it, and the term stretches instead of the bank account. The tradeoff sits on the other side of the calendar: in a strong month more goes out and you finish sooner. The total doesn’t change either way — and it can run higher than a fixed-term bank product, which is the price of that flexibility.
What does the underwriter read?
An advance is underwritten on the receipts it will be collected from; revenue-based financing on the whole revenue picture. A card-split advance lives or dies on card volume, so the desk reads your processing statements: how much runs through the terminal and how steady it is. A business paid mostly by check, invoice, or bank transfer has thin card volume and is usually steered to the fixed-debit version, which is read off bank statements instead.
Revenue-based financing looks at total deposits, not just cards: monthly revenue, how consistent the deposits are, the balances the account carries, and what other payments are already coming out. Time in business matters for both. Neither leans on collateral the way a bank line does, which is part of why both cost more than one.
What do the state disclosure laws require?
New York and California both require the company making you an offer to show its cost in a standard form, and the duty sits on the provider, not on you. New York’s Commercial Finance Disclosure Law, implemented by the Department of Financial Services in 23 NYCRR Part 600, covers commercial financing offers of $2,500,000 or less and gives sales-based financing (the regulatory name for financing repaid from a share of receipts) its own table: the funding provided, an estimated APR, the finance charge in dollars, the estimated total payment, the estimated payment and its frequency, the payment terms, the estimated term, what happens on prepayment, and any collateral requirements.
California’s rule is similar. Its Department of Financial Protection and Innovation explains that a “provider” who extends a specific offer of commercial financing must disclose the total amount of funds provided, the total dollar cost of financing, the term or estimated term, the method, frequency, and amount of payments, and a description of prepayment policies. Both laws cover commercial financing, not consumer credit, and neither approves or prices anything; they make the provider put the cost on one page so you can compare. Other states have since passed their own versions; outside New York and California, ask what yours requires.
What to compare when you hold two offers
Compare the total payback first, then the shape of the payments. The factor rate or share percentage is only the headline; the number that matters is the total dollars going back, which is easy to bury. Then work down this list:
- Total payback. Funding amount, total to repay, and the difference between them in dollars. Fees outside the factor rate (origination, ACH, wire) belong in that difference.
- Remittance frequency. Daily, weekly, or monthly, and whether it’s a percentage of receipts or a fixed amount. Daily debits look small and add up fast.
- The slow month. Does the payment flex, and if it’s fixed, is there a true-up clause and how do you trigger it?
- Prepayment. Whether paying early reduces the cost at all. With a factor rate it usually doesn’t unless the contract says so; NerdWallet notes some advance companies offer an early-payoff discount, but you have to ask.
- Legal language. Look for a confession of judgment, which NerdWallet describes as an agreement that essentially waives your right to dispute or defend yourself in court if the funder files a judgment, and for any clause making you personally liable for the balance rather than just the business. Read both; don’t skim them.
If a bank can fund the file in time, take the bank. Both of these products buy speed and flexibility, and you pay for both.
Where Aglet fits
Our revenue-based financing program is in the same family as a merchant cash advance: a lump sum now, repaid as a share of what the business actually brings in, with the percentage set up front. The remittance runs heavier in strong months and lighter in slow ones, and the total repaid can run higher than a fixed-term bank product — the price of the flexibility, shown in plain terms before you sign. Programs typically range up to 2X monthly revenue, depending on how the file looks; on the working-capital and term programs, terms run out to 48 months at the ceiling — most files land 12–24. These are illustrative ranges; the review desk’s read of your actual file is the answer.
We’re not the cheapest desk. Files that fit usually leave with a longer term and one payment instead of three — and you’ll know exactly what it costs before you sign anything. If your revenue is flat and predictable, a fixed-payment working capital program may cost less over the life of the file, and if a bank can fund you in time, take it. Two minutes and no documents on the quick assessment shows which structure your file points to; the FAQ covers the rest.
Sources
- New York State Department of Financial Services, 23 NYCRR Part 600 (Commercial Finance Disclosure Law regulation) — The provider’s duty, the $2,500,000 offer threshold, the ten-row sales-based financing disclosure table, and the required true-up explanation
- California Department of Financial Protection and Innovation, California Financing Law: Commercial Financing Disclosures — A provider extending a specific offer must disclose funds provided, total dollar cost, term, payment method, frequency and amount, and prepayment policies
- Cornell Legal Information Institute, Uniform Commercial Code § 9-109 (Scope) — Article 9 applies to a sale of accounts, chattel paper, payment intangibles, or promissory notes
- NerdWallet, What Is a Merchant Cash Advance (MCA)? (updated May 2026) — Definition, holdback and fixed-withdrawal repayment, typical factor-rate and APR ranges, early payoff, confession of judgment
- NerdWallet, Revenue-Based Financing: What It Is, Pros, Cons (updated March 2026) — A fixed percentage of monthly revenue collected until the agreed total is repaid; often no set end date; more in strong months, less in slow ones