MCA Calculator

Understanding the Math

How to Convert an MCA Factor Rate to APR

Every MCA offer comes with a factor rate — a number like 1.30 or 1.40 — instead of an interest rate. That's the first thing to unlearn if you're comparing MCA offers the way you'd compare a bank loan.

A factor rate is a fixed multiplier applied once, to the full advance amount, to determine your total repayment. It does not compound, it does not decline as you pay down the balance, and it does not change based on how quickly you repay. Multiply your advance amount by the factor rate and that's the total dollar amount you owe — full stop.

APR works differently. It expresses the cost of capital as an annualized percentage — a measure that accounts for both the dollar cost of the financing and how long you actually carry the balance. Because MCAs are typically repaid in months rather than years, converting the factor rate's flat dollar cost into an annualized APR is what actually tells you whether an offer is expensive.

Cost of capital is the dollar amount above the advance — total payback minus what you received. Divide that by the advance amount to get the cost as a percentage, then divide by how many years it takes to repay (a 5-month repayment is about 0.42 years) to annualize it.

Worked example: A $50,000 advance at a 1.3 factor rate produces a $65,000 total payback — a $15,000 cost of capital. At a 15% holdback against $60,000 in average monthly card sales, that advance repays in about 152 days, or roughly five months. Run those exact numbers through the calculator above and the effective APR comes out to approximately 72% — more than double the 30% the factor rate alone appears to suggest. That gap is the whole reason APR conversion matters: two offers with the same factor rate can carry very different effective APRs depending on how fast they're structured to repay.

Why It Costs More

Factor Rate vs. Interest Rate: Why MCAs Cost More Than They Look

The structural difference between a factor rate and an interest rate is what makes MCAs cost more than they appear at first glance, and it comes down to timing.

With an interest-bearing loan, interest accrues on the outstanding balance. As you pay down principal, the balance shrinks, and so does the dollar amount of interest charged going forward. Pay a loan off early and you save real money — you stop accruing interest on a balance that no longer exists.

An MCA doesn't work that way. The $15,000 cost of capital in the example above is fixed the moment you sign, calculated against the full advance amount, regardless of how fast the holdback repays it. There's no declining balance to benefit from and no early-payoff discount built into the structure — the total repayment amount is the total repayment amount, whether it takes three months or eight.

That fixed-cost structure is also why faster repayment cuts the wrong way for cost comparison: a quicker schedule (driven by strong card sales and a high holdback) pays the same fixed dollar cost over fewer months, which annualizes into a higher effective APR — not a lower one. Factor rate alone tells you the total dollar cost. It tells you nothing about the annualized rate until you know the repayment period.

Is This Right for You

When an MCA Makes Sense — and the Alternatives

MCAs exist because they solve a real problem: fast capital with minimal documentation, funded against revenue rather than a credit file. For a business that needs cash in days rather than weeks, that speed carries genuine value, and we won't pretend otherwise.

But an MCA is rarely the cheapest way to solve an ongoing capital need, and it's expensive as a repeat solution. A business line of credit revolves the way an MCA can't — draw what you need, repay it, and access it again — typically at a fraction of an MCA's effective APR for businesses with two or more years of operating history. If you're not sure whether your business would qualify for bank or SBA financing instead, our breakdown of bank loans vs. alternative financing walks through exactly where banks decline and where alternative capital fills the gap.

Run your numbers through the calculator above before you sign anything, compare the effective APR to what a term loan or line of credit would actually cost, and use an MCA when speed is the deciding factor — not by default. When you're ready to see what you qualify for across programs, you can apply for business financing and we'll walk through the full comparison with you.