Comparison Guide
Invoice Factoring vs. Merchant Cash Advance: A Structural Comparison
They both provide fast capital. The repayment structures are completely different — and that difference matters for B2B businesses.
- Staffing Owner/Operators
- Wholesale Distributors
- 600+businesses funded
- $900M+invoices purchased
- 97%fund again
Honest Assessment
What Is the Difference Between Invoice Factoring and a Merchant Cash Advance?
Before the table, the plain-English answer: an MCA advances money against your future revenue — you repay it as a percentage of daily sales. Invoice factoring advances money against specific invoices you've already issued to your customers — it's repaid when your customer pays the invoice. One is tied to your business performance. The other is tied to your customers' payment. Use our Capital Estimator to model your specific advance amount and fee.
Merchant Cash Advance
Repaid from your future revenue — every day, regardless of what your customers do
The MCA provider advances a lump sum and takes a fixed percentage of your daily card sales or bank deposits until the advance plus fees is repaid. Your business's daily cash flow is reduced until the balance is cleared. If business slows, you still owe the same total — it just takes longer to pay back.
Invoice Factoring (Sigma)
Repaid from your customers' payment — your operating cash flow is untouched
Sigma advances the majority of your invoice face value immediately. Repayment comes when your customer pays the invoice — not from your daily revenue. If your customer is creditworthy and pays, the cycle completes cleanly. If you add credit insurance, a customer who doesn't pay is covered by the policy, per its terms.
Know the Difference
Invoice Factoring vs. MCA: Side-by-Side
Before the table, the plain-English answer: an MCA advances money against your future revenue — you repay it as a percentage of daily sales. Invoice factoring advances money against specific invoices you've already issued to your customers — it's repaid when your customer pays the invoice. One is tied to your business performance. The other is tied to your customers' payment. Use our Capital Estimator to model your specific advance amount and fee.
AR Funding
Based On
Repayment
Effect on Cash Flow
If Customer Can't Pay
Approval Based On
Cost Structure
Invoice Factoring (Sigma)
Specific invoices owed by your B2B customers
Paid when your customer pays the invoice — not from your revenue
None — advance comes from customer's payment, not your revenue
By default you replace the invoice. Optional credit insurance covers a customer who doesn't pay.
Mainly your customers' creditworthiness
A fee on each invoice from a fee schedule set by how long your customer takes to pay, shown before you sign
Merchant Cash Advance
Your future business revenue or card sales
Daily or weekly % of card sales / bank deposits — out of your operating account every day
Reduces your daily available cash until balance is cleared
Irrelevant — you repay the full advance regardless of what your customers do
Your revenue history and daily card sales or bank deposits
Factor rate, typically 1.2–1.5× the advance. The total cost is fixed when you sign and usually doesn't fall if you repay early
Same Cash, Two Ways
What $85,000 Costs Through an MCA and Through Factoring
A hypothetical $85,000 MCA at a 1.35 factor rate, next to factoring $100,000 staffing invoices that your customers pay in 45 days. The factoring figures come from our capital estimator.
| Invoice factoring (Sigma) | Merchant cash advance | |
|---|---|---|
| Cash up front | $85,000 advance on a $100,000 invoice | $85,000 |
| Cost of one round | $3,525 fee, calculated on the full invoice, when your customer pays in 45 days | $29,750, fixed when you sign |
| Cost to keep that cash working for six months | $14,100: 4 invoices of $100,000, each paid in 45 days | $29,750, and the balance shrinks as you repay, so you have less of the cash to use each week |
| How it's repaid | Your customer pays the invoice to Sigma | Daily or weekly debits from your bank account until $114,750 is repaid |
| If sales slow down | You choose which invoices to factor, and fees follow those invoices | The debits continue until the full amount is repaid, unless the agreement ties them to your deposits |
Hypothetical illustration, not an offer. MCA terms vary; this one assumes a 1.35 factor rate. Your proposal states your own advance and fee schedule.
For B2B Businesses
Why B2B Businesses Should Look at Invoice Factoring First
If your revenue comes from invoicing other businesses — not card swipes or consumer sales — factoring is structurally designed for your situation. Here's why.
Reason 01
You're not repaying from tomorrow's sales.
MCA repayment comes out of your daily revenue — a drag on every business day until the balance clears. With factoring, repayment comes from your customer's payment, not your operating account. Your daily cash flow isn't touched.
Reason 02
Your cost is in dollars before you sign.
An MCA factor rate of 1.2× to 1.5× means an $85,000 advance costs $17,000 to $42,500, and the cost usually doesn't fall if you repay early. A factoring fee is calculated on the full invoice from a fee schedule set by how long your customer takes to pay, and your proposal shows it before you sign.
Reason 03
Optional protection if a customer doesn't pay. MCAs have no equivalent.
Add credit insurance and a customer who doesn't pay is covered by the policy, per its terms. With an MCA, you owe the advance regardless of what your customers do.
Honest Assessment
When Does an MCA Make Sense?
We include this section because the right product depends on your business type — and we'd rather tell you the truth than close a bad fit.
When MCA may be the appropriate tool
MCAs are designed for retail and consumer-facing businesses — restaurants, service businesses, e-commerce companies, and other merchants who generate revenue from card transactions rather than B2B invoices. If your revenue doesn't come from invoicing other businesses, factoring may simply not be available to you: there are no B2B receivables to advance against. For those businesses, an MCA's revenue-based repayment can be a workable model. For B2B businesses with invoices — staffing agencies, manufacturers, distributors, professional services firms, trucking companies — factoring is almost always the better-structured product. The repayment mechanics, the cost transparency, and the credit insurance option all align with how B2B cash flow actually works. If you're a B2B business that was offered an MCA, it's worth running the factoring comparison before signing.
Your Specific Situation
See How Factoring Works for Your Industry
Staffing
See how it works for staffing agencies
W-2 and 1099 payroll, weekly invoice cycles, credit insurance options. NOA is handled professionally — your customer relationships stay intact.
Wholesale Distribution
See how it works for wholesale distributors
Inventory-to-payment gaps, large order financing, selective factoring by customer. The margin ROI case, fully explained.
Not Sure Which Fits?
Take the 5-Question Factoring Fit Assessment
Answer five questions about your business, customers, and invoice volume. Get an instant result: whether your invoices qualify for factoring, and what to expect from a proposal.
See Which Option Fits Your Invoice Cycle
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