Merchant cash advance vs bridging loan: which should you choose?
By Helm, Funding Specialist
- MCAs require no collateral; bridging loans are secured against property
- Both can be arranged quickly compared to traditional bank loans
- MCAs repay through card sales; bridging loans have a fixed exit strategy
- Bridging loans suit property transactions; MCAs suit working capital
- The right choice depends on what you need the funds for
If you need funding quickly, both merchant cash advances and bridging loans can deliver capital faster than a traditional bank loan. However, they are designed for very different purposes and come with different costs, risks, and structures.
This guide compares the two options to help you decide which is right for your situation.
How a merchant cash advance works
A merchant cash advance gives you a lump sum repaid through a percentage of your daily card transactions. There is no fixed repayment schedule, no collateral required, and no personal guarantee. The total cost is agreed upfront through a factor rate.
How a bridging loan works
A bridging loan is a short-term secured loan, typically lasting 3 to 18 months. It is secured against property or land and is designed to bridge the gap between a purchase and longer-term finance or a sale. Monthly fees are charged, and you need a clear exit strategy to repay the loan.
Key differences at a glance
Here is a side-by-side comparison.
| Feature | Merchant Cash Advance | Bridging Loan |
|---|---|---|
| Security required | None | Property or land |
| Repayment method | % of daily card sales | Lump sum at end of term or monthly |
| Typical term | 3 to 12 months (flexible) | 3 to 18 months (fixed) |
| Speed of funding | 24 to 48 hours | 1 to 3 weeks |
| Personal guarantee | Not required | Usually required |
| Best for | Working capital and growth | Property purchases or renovations |
| Regulation | Generally unregulated | FCA regulated |
| Cost structure | Fixed factor rate | Monthly fees plus arrangement fee |
When to choose an MCA
A merchant cash advance is the better option when:
- You need flexible working capital for any business purpose
- You do not own property to use as security
- You want repayments that adjust with your revenue
- You need funds within 48 hours
- You prefer not to provide a personal guarantee
When to choose a bridging loan
A bridging loan is the better option when:
- You need to purchase property or land quickly
- You have a clear exit strategy such as a property sale or refinance
- You need a larger sum than your card revenue supports
- You are comfortable using property as security
- You are buying at auction or need to complete a purchase quickly
Cost comparison
Bridging loans typically charge a monthly fee of 0.5 to 1.5 percent of the loan amount, plus an arrangement fee of 1 to 2 percent. This means the total cost depends on how long you hold the loan.
An MCA has a fixed total cost determined by the factor rate. Whether repayment takes three months or twelve, the total amount stays the same. This makes budgeting simpler but means you do not save money by repaying faster.
Frequently asked questions
Can I use a bridging loan for working capital?
While technically possible, bridging loans are designed for property-related transactions. The costs and risks make them unsuitable for general working capital compared to an MCA.
Which is faster to arrange?
An MCA is typically faster, with approval in 24 to 48 hours. Bridging loans can take one to three weeks due to property valuations and legal work.
Can I have both at the same time?
Yes. Since they serve different purposes and are secured differently, having both is possible. However, make sure the combined repayments are manageable.
Which is more expensive?
It depends on the specific terms. Bridging loans can be cheaper on a percentage basis but require property as security. MCAs cost more but carry no collateral risk.