Merchant funding vs bank loans: which is better?
By Helm, Funding Specialist
Key takeaways
- Merchant funding is faster and more accessible
- Bank loans are cheaper but harder to qualify for
- Merchant funding has flexible repayments
- Bank loans have fixed monthly payments
- The best choice depends on your priorities
If you are looking for business capital, you are probably weighing up merchant funding against a traditional bank loan. Both provide the money you need, but they work very differently.
Side-by-side comparison
| Feature | Merchant Funding | Bank Loan |
|---|---|---|
| Speed | 24 to 48 hours | 2 to 8 weeks |
| Repayment | % of daily card sales | Fixed monthly |
| Cost | Factor 1.15 to 1.50 | 4% to 15% APR |
| Collateral | None | Often required |
| Personal guarantee | Not required | Usually required |
| Credit check | Soft check | Full check |
| Approval rate | High | Lower for SMEs |
| Flexibility | High | Low |
When to choose merchant funding
Merchant funding is better when:
- You need money within 48 hours
- Your credit is poor
- You want to avoid personal guarantees
- Your revenue is seasonal
- You process regular card payments
When to choose a bank loan
A bank loan is better when:
- You have strong credit
- You can wait weeks for approval
- Lowest cost is your priority
- You need a large amount
- You prefer fixed payments
Frequently asked questions
Can I have both?
Yes. Many businesses use bank facilities for core needs and merchant funding for short-term opportunities.
Which is easier to get?
Merchant funding has much higher approval rates.
Which costs less?
Bank loans are cheaper on total cost. But merchant funding offers speed and flexibility that banks cannot match.
Which is better for seasonal businesses?
Merchant funding, because repayments flex with your revenue.