How to Compare Two Merchant Cash Advance Offers Side by Side

Merchants with two offers almost always compare the factor rates and pick the lower one. That is the wrong comparison about half the time. The cost of an advance is set by factor rate, term, and fees together, and the survivability of an advance is set by the payment against your deposits. This guide runs both comparisons on a realistic pair of offers. Our free offer checker does the same computation on yours.

The worked example

A contractor with about $70,000 in monthly deposits receives two offers for a $50,000 advance. Offer A has the lower factor rate. Offer B has the longer term.

Reading the comparison

Offer A wins on one line: total dollars. It costs $1,500 less over its life. Offer B wins on almost everything else. Its payment is 37 percent lower, it consumes under 10 percent of deposits instead of nearly 16, its fees are a quarter of A's, and because the same cost is spread over more time its annualized cost is roughly 84 percent against A's roughly 134 percent.

Which one is right depends on the business. If the $50,000 is buying inventory that turns into billed jobs within eight weeks and deposits are steady, Offer A's higher payment is survivable and the $1,500 saving is real. If deposits swing month to month, or there is already another position in the account, Offer A's 15.7 percent load is the kind of number that produces bounced ACHs by month three. Cheaper on paper becomes far more expensive the moment a default clause fires.

The eight-line worksheet

1. Advance. The headline number.
2. Fees deducted at funding. Every one. If the offer sheet does not list them, ask.
3. Net funded. Advance minus fees. The money you actually get.
4. Total payback. Advance times factor rate.
5. Cost. Payback minus net funded. Compare this, not the factor rate.
6. Payment and term. Payback divided by payment equals number of payments. Convert to months.
7. Payment share of deposits. Monthly payment (daily × 21 or weekly × 4.3) divided by average monthly deposits, including any existing positions.
8. Contract terms. Prepayment discount, reconciliation, confession of judgment, default triggers, payoff policy. Two offers with identical numbers can be very different contracts. Our red flags guide lists what to check.

Three comparison traps

Comparing factor rates without terms

A 1.30 over four months is more expensive per year than a 1.38 over ten. Our factor rate table shows the full grid. Factor rate alone tells you nothing about cost per unit of time.

Ignoring net funded

Two offers at the same factor and term are not the same offer if one deducts 4 percent in fees and the other deducts 1 percent. On $50,000 that is a $1,500 difference in what lands in your account while the payback stays identical.

Falling for the renewal pitch

"We'll renew you once you're 50 percent paid down" sounds like a benefit. In practice the renewal often pays off your remaining balance with new money at a new factor, so you pay a factor on money that was already carrying a factor. If a renewal is part of the pitch, ask what the effective cost is on the fresh capital alone. Many merchants discover that number is well above the original offer.

When neither offer is the right one

Sometimes the honest answer is that both offers are priced for a weaker file than yours, or that the amount is more than the business can carry. Underwriting your own statements before you choose tells you which. That is the point of a second opinion: not to sell you a third offer, but to tell you what your file supports so you can pick, counter, or wait from a position of knowledge.

How this guide was produced. Written by the team that built our statement-reading underwriting engine. Cost figures are computed from cash-flow math (IRR on the actual payment schedule), not quoted from marketing pages. Nothing here is legal or financial advice.