Bank Line of Credit, Cash Advance, or Working Capital: Which One Fits the Problem?

The bank line of credit

A line of credit is revolving: the bank sets a limit, you draw what you need, repay it, and draw again. It is the cheapest money on this list and the best tool for a recurring, long-running need, which is exactly why it's hard to get. The bank underwrites on two or three years of tax returns, financial statements, often collateral, and a committee, and the answer takes weeks to months with a real chance of no at the end.

It fits when you have strong credit, clean financials, and time. It doesn't fit the problem that's due Friday, or the business the bank won't approve yet. Paying working capital on schedule is a positive on that file later.

• Working capital vs. a bank line of credit

The merchant cash advance

A merchant cash advance is a purchase of your future receivables. The provider advances a lump sum and collects a fixed percentage of daily card sales until a set total is repaid. It's fast, and it has a place, but two things make it hard to evaluate: repayment rises and falls with sales, so the timeline is unpredictable, and the cost is usually quoted as a factor on the advance rather than as a total you can compare against anything else.

It fits a business with heavy card volume that needs money this week and knows exactly what it's signing. It doesn't fit a business that's already stretched, because the daily pull from sales is relentless in a slow week, and stacking a second advance on the first is how businesses get into real trouble.

• Working capital vs. a merchant cash advance

Fixed-term working capital

Fixed-term working capital is a set amount repaid on a fixed schedule over a set term, decided on three months of business bank statements rather than tax returns. You know the amount, the term, the total cost and the payment before you sign, and the repayment doesn't move with your sales. It sits between the other two: far faster and more reachable than a bank, far more predictable than a cash advance.

Avanti's working capital runs $10,000 to $250,000 over 6 to 24 months for any business with a year of history and steady deposits, with no down payment and every credit profile considered. You see the total cost and payment schedule in plain numbers before you commit. Terms usually come the same business day the statements arrive; funds in as little as 24 hours after you sign.

• Working capital in as little as 24 hours
• Working capital with bad credit

Three numbers to check on any offer

Whichever tool you're looking at, put these three in writing before you sign anything. A provider who won't put them in writing has answered your question.

• The total you will repay, in dollars, not a headline amount or a factor. This is the only number that lets you compare two offers.
• The payment schedule: how much, how often, from where, and what happens if a payment is missed.
• What, if anything, is pledged. A lien on your trucks, your equipment or your receivables changes what you can do next, and it should never be a surprise.

Matching the tool to the problem

A recurring need and time to wait: build the bank relationship, and use working capital in the meantime. A short, specific gap with a clear payoff, a draw, a repair, a season, a down payment: fixed-term working capital, sized from your deposits. Money this week with heavy card sales and a clear head about the cost: a cash advance can work, once, with the three numbers in writing.

The wrong answer is the one taken in a panic. Ten minutes with your last three bank statements and the three numbers above turns a panic into a decision.

• Apply for working capital
• How fast working capital funds