Merchant Cash Advance Cost Calculator

What does a merchant cash advance really cost?

A merchant cash advance is repaid with a fixed total, not with interest. You multiply the advance by the factor rate to get the total payback. A $10,000 advance at a factor rate of 1.30 means you repay $13,000, so the advance costs $3,000.

The cost looks smaller than it is because repayment is usually spread over a few months through frequent automatic debits. The shorter the repayment period, the higher the annual rate behind the same $3,000. Use the calculator above to see the APR equivalent for your own numbers, and ask the funder for the total dollars you will repay and every fee in writing.

How is a factor rate different from an interest rate?

An interest rate is charged over time, so the cost grows the longer you owe the money. A factor rate is charged once, up front, on the whole advance. Paying the advance back sooner does not usually lower the total, because the total was fixed when you signed.

That is why a factor rate cannot be compared directly with an interest rate or an APR. To compare an offer with a loan, convert it to total dollars repaid and the length of repayment, which is what the APR equivalent above does.

What are cheaper alternatives to an MCA?

Depending on your business, these often cost less than a merchant cash advance:

• A business line of credit, where you pay for what you draw
• A term loan with a stated interest rate and a fixed repayment schedule
• Invoice factoring, which advances money against specific unpaid invoices
• Equipment financing, where the equipment secures the financing
• A microloan from a community lender or CDFI

Eligibility differs for each option. To compare the first two in depth, read Business Line of Credit vs. Term Loan.