Advantages of a Working Capital Loan Over a Merchant Cash Advance

When you’re in the process of acquiring business capital, it’s important to know the differences between major funding types. A merchant cash advance and a working capital loan may seem similar in many respects but there are important differences that you should be aware of.

What is a Merchant Cash Advance?

A merchant cash advance is a form of capital that’s repaid in daily, variable amounts, as a percentage of each debit card or credit card transaction until the agreed-upon amount and fees are repaid.


Business owners may be drawn to a merchant cash advance because of the relative flexibility when compared with traditional bank loans. Cash advance institutions aren’t typically concerned with a borrower’s creditworthiness; instead, they want to see that you have consistent daily sales rolling in. As long as you can provide point-of-sale or bank data showing what your cash flow looks like, you’re likely to be approved for a merchant cash advance.


No Protection

A large disadvantage of merchant cash advance is that this type of capital is not technically a loan. Rather, it’s legally considered a sale of a percentage of the business owner’s future sales. This classification means that merchant cash advance businesses aren’t held to the same standards as financing institutions who legally call their product a loan, nor are they held to state usury laws. By taking advantage of this kind of financing, you could put yourself at risk for predatory lending practices, damaging your business’ finances.

Approval Limitations

The amount of a Merchant cash advance is predicated strictly upon your credit and debit card transactions. If your business conducts many transactions via wire transfer, ACH, or cash, this can adversely affect the amount of capital you’re eligible to borrow. So if your total revenue is $1,000,000.00 but only $400,000.00 of that are card transactions, this would severely limit the loan amount available to you.

Unpredictable Payment Terms

Merchant cash advance loans are repaid as a percentage of your daily sales, which can fluctuate largely from day-to-day. This makes it impossible to know for sure when your loan will be repaid in full, making it hard to plan for future financial contingencies. Additionally, many merchant cash lenders require that you switch to their approved credit card processor, which can put a hiccup in your own operations and cause delays when it comes to accessing your own cash flow.

What is a Working Capital Loan?

A working capital loan immediately increases your operating liquidity and cash flow, providing you with the capital you need to maintain daily operations. You receive a lump sum loan, and the funds are unlimited in their use – you can use this capital to reinvent your marketing campaign, upgrade your equipment, take advantage of an expansion opportunity, or simply get ahead financially.

Like merchant cash advances, working capital loans can be repaid in small, daily, manageable repayments. But unlike merchant cash advances, working capital loans are legally loans, which mean that you have the benefit of state usury law on your side, and you’re protected from predatory practices.

Even if you qualify for a business loan from a traditional bank, working capital loans are much quicker, easier to qualify for and have no restrictions on the use of your funds. Mulligan Funding specializes in providing flexible funding solutions for small businesses.  


Working capital loans are highly flexible and a good choice for small businesses of many types, such as HVAC, restaurants, auto repair, and more. They also aren’t subject to the credit card and debit card transaction restrictions that come with merchant cash advances.

Convenient Payment Terms

Working capital loans are repaid in small, daily amounts automatically, but unlike merchant cash advances, the amount is predictable and easy to plan around. You have a consistent payment amount that you can count on and plan for.

Not Tied to Card Transactions

This type of loan is an appropriate solution for any type of business, not just businesses that primarily deal with credit card sales. Because working capital loans aren’t tied to your credit card transactions, you don’t have to switch payment processors, so you don’t face unnecessary delays in accessing your own capital. And most importantly, you can qualify for much higher loan amounts because all of your revenue is considered in a loan offer, not just your card transactions.

Flexible Spending

Working capital loans give you access to fast capital that you can use for any purpose, making them a great choice for taking advantage of that growth opportunity you’ve had your eye on, or getting ahead on accounts payable.

Other advantages to working capital loans are lender-specific. When you work with Mulligan Funding, the advantages include:

  • Single-page application process
  • Easy-to-meet approval standards 
  • Fast disbursal of funds once approved
  • Small, manageable daily repayments
  • No assigned collateral required

A working capital loan can be the solution you need regardless of what you need the funds for. So how do you find the right lending partner for your working capital financing?

Find the Right Lending Partner

Once you’ve decided which type of capital solution is best for your needs, it’s time to find a lending partner to work with. As a small business owner, you want a lending partner that values you and your business instead of just seeing you as “a transaction” to make a buck. Banks are abundant and easy to find, but very difficult to get approved by.

When you seek out business financing with the help of Mulligan Funding, you take advantage of their experienced finance professionals, who are standing by to help elevate your business to the next level of success. Finding a lending partner that you can trust to treat you fairly and with respect isn’t always easy. But at Mulligan Funding, we believe that trust is earned one client at a time. We look forward to earning yours.

Other advantages of working with Mulligan Funding include:

  • No double fees High approval rates
  • Experienced professionals ready to work on your account
  • A valuable partnership that can last years, through all your business successes  

So what are you waiting for? Call Mulligan Funding at 855-326-3564 to discuss your financing options today!

The information shared is intended to be used for informational purposes only and you should independently research and verify.

Note: Prior to January 23, 2020, Mulligan Funding operated solely as a direct lender, originating all of its own loans and Merchant Cash Advance contracts. From that date onwards, the majority of funding offered by Mulligan Funding will be by Loans originated by FinWise Bank, a Utah-chartered Bank, pursuant to a Loan Program conducted jointly by Mulligan Funding and FinWise Bank.