Last updated: October 19, 2026. General information only.
Revenue-based financing and a merchant cash advance both give you a lump sum now. They take it back from future sales. The difference is how they collect. Revenue-based financing usually takes a share of monthly revenue. So the payment drops in a slow month. An MCA usually pulls a fixed daily or weekly amount. In 2026, compare both by total dollars repaid. Do not judge by the headline rate alone.
The short version
Both products turn future sales into money today. Read the payment clause before you sign.
| Point | Revenue-based financing | Merchant cash advance |
|---|---|---|
| What you get | A lump sum now | A lump sum now |
| How you pay it back | Usually a share of revenue | Usually a card split or fixed debit |
| How often money comes out | Usually tied to revenue periods | Usually daily or weekly |
| What happens in a slow month | Payment usually drops with revenue | Payment often stays fixed |
| How the cost is stated | Usually a total repayment amount | Usually a factor rate |
| Who it usually fits | Steady or recurring sales | Steady card or bank sales |
How revenue-based financing works
You get a lump sum. The provider sets a total repayment amount. You send a set share of revenue each period until that total is paid.
This usually fits steady sales. Subscription, ecommerce, and service contract sales can fit. Pre-revenue businesses generally cannot use it. See startup business funding for earlier-stage options.
How a merchant cash advance works
An MCA is usually written as a purchase of future sales. It is usually not written as a loan. Collection is usually daily or weekly, by card split or fixed bank debit. Cost is usually shown as a factor rate.
Read is a merchant cash advance a good idea before you sign. Then read the MCA contract clauses guide.
The question that matters: what happens in a slow month?
With a true revenue share, the payment falls when sales fall. That can protect cash in a weak month.
With a fixed debit, the payment keeps coming. It keeps coming unless the contract allows an adjustment. Some contracts call that adjustment reconciliation.
Read the payment clause. Ask in writing how the payment changes if sales drop. Keep the written answer.
How to compare two offers in dollars
Compare total dollars repaid, not the headline rate.
- Write down the amount you actually receive after fees.
- Write down the total you will repay.
- Subtract the first amount from the total to get the dollar cost.
- Estimate how long repayment takes at normal sales.
- Estimate how long repayment takes in a slow month.
- Ask for the estimated APR if the provider gives one.
Here's a hypothetical. Harbor Lane Bakery is a made-up business in this example. It receives $10,000 after fees in this example. It repays $12,000 in total in this example. The dollar cost is $2,000 in this example.
Use the cost of capital calculator to run your own figures. Read business loan interest rates for rate context.
What some state regulators now require you to be shown
New York has a Commercial Finance Disclosure Law. The New York State Department of Financial Services says it covers certain providers of commercial financing up to $2,500,000. Providers must give standardized disclosures when they make an offer. The Department adopted the regulation on February 1, 2023. The regulation is 23 NYCRR Part 600, with specific rules for sales-based financing.
New York Financial Services Law section 803 lists the sales-based financing items. They include the total financing amount and the finance charge. They also include an estimated APR, the total repayment amount, the estimated term, and the payment amounts.
The California Department of Financial Protection and Innovation lists its disclosure items online. They include the total amount of funds provided and the total dollar cost. They also include the term or estimated term, the method, frequency, and amount of payments, and prepayment policies. The recipient must sign the disclosures before the deal is finalized.
Ask for the disclosure in writing wherever you are.
Cheaper options to check first
Start with a line of credit at your own bank. Read how to get a business line of credit and business line of credit vs merchant cash advance.
If you bill other businesses, read what is invoice factoring and how does it work for small businesses. Also read working capital loans.
Check SBA options and grants through the pillar below.
Already in an MCA?
Read how to refinance a merchant cash advance first. Compare the total repaid on every path.
If cold calls and texts start after you shop, read how to stop MCA broker calls. You can also go direct, as business funding without a broker explains.
Every other way to fund your business
Revenue-based financing is one option only.
See every way to fund your business
Also compare merchant cash advance alternatives and best business funding options compared.
Sources
Disclosure rules checked on DFS.NY.gov, NYSenate.gov and DFPI.CA.gov on October 19, 2026.
- New York State Department of Financial Services: Commercial Finance Disclosure Law regulation
- New York Senate: Financial Services Law section 803
- California Department of Financial Protection and Innovation: commercial financing disclosures
FAQ
What is revenue-based financing? Revenue-based financing is a lump sum repaid by sending a set share of your revenue until an agreed total is paid.
Is a merchant cash advance the same as revenue-based financing? No. Both are repaid from future sales, but an MCA usually collects a fixed daily or weekly amount and states its cost as a factor rate.
Which is cheaper, revenue-based financing or an MCA? Neither is always cheaper. Compare the total dollars repaid and how long repayment takes, not the headline rate.
What happens to my payment in a slow month? With a true revenue share it drops. With a fixed debit it keeps coming unless the contract allows an adjustment and you ask for it in writing.
Can a startup with no revenue get revenue-based financing? Generally no, because payments come from revenue. Look at startup funding options instead.
Do providers have to show me an APR? Some states require an estimated APR or other standardized disclosures on these offers, New York among them. Ask for the disclosure in writing either way.
How do I compare two revenue-based offers? Compare the amount received after fees, the total repaid, the dollar cost, and the estimated time to repay at normal and slow sales.