Merchant cash advance vs crowdfunding: which is better for your business?
By Helm, Funding Specialist
- MCAs provide guaranteed funding; crowdfunding success is not guaranteed
- MCAs are private; crowdfunding requires public campaigns
- Crowdfunding can raise awareness alongside funding
- MCAs are much faster, typically funded within 48 hours
- The right choice depends on your goals, timeline, and preferences
Merchant cash advances and crowdfunding are both alternatives to traditional bank loans, but they could not be more different in how they work. One is a private commercial transaction, while the other is a public campaign to raise money from many individual supporters.
This guide compares both options so you can decide which is right for your situation.
How a merchant cash advance works
A merchant cash advance gives you a lump sum from a single provider, repaid through a percentage of your daily card transactions. The process is private, fast, and requires no public campaign or marketing effort. You apply, get approved, and receive funds, typically within 48 hours.
How crowdfunding works
Crowdfunding involves creating a public campaign on a platform like Kickstarter, Crowdcube, or Seedrs. You set a funding target and invite people to contribute. Depending on the type of crowdfunding, backers receive rewards, equity, or simply the satisfaction of supporting your business.
There are three main types: reward-based (backers get products or perks), equity-based (backers receive shares), and debt-based (backers receive repayment with a return).
Key differences at a glance
Here is a side-by-side comparison.
| Feature | Merchant Cash Advance | Crowdfunding |
|---|---|---|
| Funding certainty | Guaranteed once approved | Not guaranteed, depends on campaign success |
| Speed | 24 to 72 hours | Weeks to months |
| Privacy | Completely private | Public campaign required |
| Effort required | Minimal (application only) | Significant (campaign creation and marketing) |
| Repayment | % of daily card sales | Rewards, equity, or debt repayment |
| Cost | Fixed factor rate | Platform fees plus reward or equity costs |
| Best for | Working capital and growth | Product launches and community building |
When to choose an MCA
A merchant cash advance is the better choice when:
- You need funding quickly and cannot wait for a campaign to run
- You prefer to keep your funding private
- You do not want to give away equity in your business
- You need working capital for day-to-day operations
- You do not have the time or resources to run a marketing campaign
When to choose crowdfunding
Crowdfunding may be the better option when:
- You are launching a new product and want to validate demand
- You want to build a community of supporters alongside raising funds
- You are comfortable giving away equity or offering rewards
- You have the time and marketing skills to run a successful campaign
- You want the publicity that comes with a public funding campaign
Can you use both?
Yes. Some businesses use crowdfunding for a specific product launch and an MCA for ongoing working capital. The two serve different purposes and can complement each other well.
Just be mindful of your total financial commitments and make sure you can manage repayments or obligations from both.
Frequently asked questions
What if my crowdfunding campaign fails?
If your campaign does not reach its target, you typically receive no funding (on most platforms). An MCA, once approved, guarantees funding regardless of external factors.
Is crowdfunding free?
No. Crowdfunding platforms charge fees, typically 5 to 10 percent of funds raised. You also need to factor in the cost of rewards, marketing, and time spent running the campaign.
Which raises more money?
It depends. Successful crowdfunding campaigns can raise large sums, but many campaigns fail to reach their target. An MCA amount is based on your card revenue and is guaranteed once approved.
Do I give away ownership with an MCA?
No. A merchant cash advance does not involve any equity or ownership transfer. You retain full control of your business.