Understanding small business financing types: Term loans, lines of credit, and merchant cash advances
Journey Capital TL;DR: Choosing the right small business financing type depends on your business needs and cash flow. Term loans are best suited for long-term investments. Lines of credit offer ongoing flexibility. Merchant cash advances provide fast access to working capital based on future sales. Each option has unique strengths, so select the one that aligns with your goals and financial situation.
Find the right financing for your business
Securing the right financing can help your business grow, manage cash flow, or overcome short-term challenges. In Canada, three popular options (business term loans, lines of credit, and merchant cash advances) offer distinct advantages. Here is how each works and how to choose the best fit for your business.
1. Business Term Loans
A business term loan provides a one-time lump sum that you repay in fixed installments over a set period.
Key features:
- Fixed amount and repayment schedule
- Predictable monthly or weekly payments
Best for:
- Equipment or inventory purchases
- Business expansion or renovations
- Consolidating higher-interest debt
2. Business Lines of Credit (LOC)
A business line of credit offers flexible financing up to a set limit. You can draw funds as needed and only pay interest on what you use.
Key features:
- Borrow as needed up to your approved limit
- Only pay interest on the amount used
- Reusable as you repay (revolving credit)
Best for:
- Managing seasonal or cyclical cash flow
- Covering unexpected expenses
- Short-term operating needs
3. Merchant Cash Advances (MCAs)
Also called Flex Funds Advances at Journey Capital, merchant cash advances provide a lump sum that you repay as a percentage of your future sales.
Key features:
- Fast approvals and funding
- Repay based on a percentage of daily or weekly sales
- No fixed monthly payments—repayments adjust with revenue
Best for:
- Quick access to capital.
- Businesses with variable or fluctuating revenue.
- Short-term needs without fixed repayments.
How to choose the right option
Ask yourself:
- What is the financing for?
Match the product to your goal, whether it is expansion, stability, or flexibility. - What does your cash flow look like?
Consider your ability to manage fixed or variable repayments. - What will it cost?
Review the total cost of borrowing, including interest and fees. Make sure you understand the pricing method.
Why choose Journey Capital?
Journey Capital offers all three financing types: term loans, lines of credit, and merchant cash advances. We provide fast approvals, flexible terms, and personalized service. Whether you are growing your business or navigating a tough season, our team is here to help you reach your next milestone.
Frequently Asked Questions
A term loan gives you a lump sum with fixed repayments. A line of credit lets you borrow and repay as needed, offering more flexibility.
A business loan provides a lump sum repaid in fixed installments, usually with a predictable interest rate and schedule. A Merchant Cash Advance gives you fast access to capital repaid as a percentage of future sales, so payments adjust with your revenue.
Cash advances often have higher short-term costs, but they offer fast access and flexible repayments that adjust with your revenue.
Journey Capital offers the ability to combine our Business Term Loan or Flex Funds Advance with our Business Line of Credit through our Dual-Financing program. Learn more about Dual Financing.
Yes. We provide the widest selection of small business financing types available online.
Discover the right financing for your business. Apply online and see what you are eligible for. There is no obligation to continue, and applying will not affect your credit score.