Merchant Cash Advance Calculator

How a factor rate converts to APR

A merchant cash advance is priced with a factor rate, not an interest rate. Your total repayment is the advance multiplied by the factor rate, and the fee is fixed on day one. It doesn't grow if you repay slowly, and it usually doesn't shrink if you repay fast. To compare an MCA with a loan or a line of credit, you have to turn that fixed fee into an annual rate. There are two ways to do it, and they give very different answers.

1. Simple annualized cost. The formula is:

Simple annualized cost = (fee ÷ advance) × (365 ÷ term in calendar days) × 100

With a month counted as 365 ÷ 12 days, that's the same as (factor rate − 1) × (12 ÷ term in months). A 1.25 factor rate over 9 months works out to 0.25 × (12 ÷ 9) = 33%, the "Simple annualized cost" line in the tool above. It's quick and good for comparing two offers side by side, but it assumes you hold the full advance for the whole term, so it understates the cost.

2. Estimated effective APR (daily payments), the headline figure in the tool above. You don't hold the full advance for the whole term. You start paying it back the next business day, so on average you only have about half the money in hand. The effective APR solves for the annual rate at which equal payments on every business day (260 a year, about 21.67 a month) equal the cash you received, then multiplies the per-payment rate by 260. That's the actuarial method a loan APR or a California or New York commercial-financing disclosure uses. It comes out at roughly 1.8 to 1.9 times the simple figure. That same 1.25 / 9-month advance (195 business-day payments of about $321) is about 62% estimated effective APR.

Why a short term inflates APR. The fee is fixed, so squeezing it into fewer months raises the annual rate in direct proportion. A 1.25 factor rate is about 46% estimated effective APR over 12 months, about 92% over 6 months and about 183% over 3 months. The dollar cost is $25 per $100 advanced in every case. When a funder offers a "faster payoff," check whether the factor rate drops with it. If it doesn't, the faster payoff only raises your APR.

Typical range. Common deals (factor rates of 1.20 to 1.45 over 5 to 12 months) work out to an estimated effective APR of about 40% to 200% using this method. Very short terms or high factor rates run higher.

Holdback %, daily remittance and estimated payoff days

Many MCAs don't charge a fixed payment. They take a holdback (also called the retrieval rate), a fixed percentage of each day's card or bank deposits. The math has three steps:

• Daily remittance = holdback % × your daily receipts
• Total repayment = advance × factor rate
• Estimated payoff days = total repayment ÷ daily remittance

Example: a restaurant with $1,200 a day in card sales and a 15% holdback remits $180 a day. On a $33,750 payback, that's 33,750 ÷ 180 ≈ 188 days, or just over 6 months. If sales drop to $1,000 a day, the remittance falls to $150 and payoff stretches to 225 days. The total you owe stays the same, which is why a true split-holdback MCA should flex with your revenue. Many modern deals use a fixed daily or weekly ACH instead, which doesn't flex unless you formally request a reconciliation. The calculator's daily and weekly figures assume even payments spread across the term.

Three worked examples

These are hypothetical scenarios, not real customers or real offers. Every figure comes from the same formulas the calculator uses (equal payments on business days), so you can enter the inputs above and get the same results.

Estimated effective APR assumes equal payments on business days (260 a year, about 21.67 a month), no early payoff and no extra fees. Simple annualized cost counts the term in calendar days (365 a year). On a weekly schedule (52 payments a year) the effective APR comes out about 1 point lower, for example 78% instead of 79% in the trucking example.

Typical factor-rate ranges by credit and time in business

Pricing varies by funder, industry and bank-statement health, so treat these as typical market ranges, not quotes:

• Established and strong (2+ years in business, steady deposits, credit around 650+, no existing advances): often about 1.10–1.25.
• Mid-profile (1–2 years, credit around 550–650, some seasonality): often about 1.25–1.35.
• Higher risk (under 1 year, credit below about 550, negative balance days, or an existing advance): often 1.35–1.50, sometimes higher.

Your industry matters as much as your credit score. Restaurants, trucking and construction often price higher because their revenue swings. For the full breakdown, see understanding factor rates and APR vs. factor rate.

Early payoff and prepayment discounts

Paying a loan off early saves interest. Paying an MCA off early usually doesn't, because the full factor-rate fee is owed no matter when you finish. Some funders offer an early-payoff discount (for example, a reduced balance if you pay in full within the first 30, 60 or 90 days), but it's a contract term, not a right. Before you sign, ask whether there's a prepayment discount, how it's calculated, and whether it's written into the agreement. A verbal promise isn't enforceable. If there's no discount, an early payoff doesn't change your dollar cost, so the calculator's total repayment is what you'll pay.

Stacking risk: why a second advance changes the math

"Stacking" means taking a second (or third) MCA while the first is still open. Each funder takes its own holdback, so a 12% and a 10% remittance together take 22% of every deposit. Second-position advances are also usually priced higher, and many first-position contracts prohibit stacking. A breach can trigger default terms. Run each advance through the calculator separately, add the daily payments, and compare the total to your daily deposits. If the combined payments take more than you can spare on a slow day, that's the warning sign. See MCA stacking risks and alternatives.

What to do with your number

• Compare it. Line up offers and alternatives on the comparison page. If a term loan or line of credit is available to you, it will almost always be cheaper than a 60%+ effective APR.
• Prepare. Gather 3–6 months of bank statements and the other documents in the MCA application checklist. Clean statements are the biggest lever on your factor rate.
• Get matched. Take the 2-minute funding quiz to see which provider types fit your revenue, credit and time in business. Then negotiate: dropping from 1.35 to 1.25 on $100,000 saves $10,000 (negotiation calculator).