What Is a Merchant Cash Advance?
A Merchant Cash Advance is business funding where you receive a lump sum in exchange for a percentage of your future sales. It is not a loan — repayment is made through daily or weekly deductions from your revenue.
MCAs are fast to fund and require minimal documentation, but they carry a high effective cost. Use this calculator to see the full picture before signing.
How This Calculator Works
MCA Buy Rate Calculator
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Fill in all fields to calculate your total payback, daily payment, and effective APR.
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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.
Effective APR ≈ (Cost of Capital ÷ Advance Amount) ÷ (Repayment Period in Years) × 100
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.
Results are estimates based on the inputs provided and standard assumptions. They do not represent a loan offer, approval, rate commitment, or lender decision. Actual terms are determined by lenders based on full underwriting review.
Related Programs
Financing Programs to Consider Instead
MCAs are one option. Explore others that may cost less and fit your deal better.
Frequently Asked Questions
MCA Calculator — Common Questions
What is a Merchant Cash Advance (MCA)?
A Merchant Cash Advance is a type of business funding where a company receives a lump sum in exchange for a percentage of future sales. It is not a loan — repayment is made through daily or weekly deductions from your revenue (called the holdback or retrieval rate). MCAs are fast but typically more expensive than traditional financing.
What is a factor rate?
A factor rate is a decimal multiplier used to calculate your total repayment amount. For example, a $50,000 advance at a 1.35 factor rate means you repay $67,500 total — regardless of how quickly you pay it back. Factor rates are not the same as interest rates and do not compound over time.
How do I convert a factor rate to APR?
Divide the cost of capital (total payback minus the advance amount) by the advance amount, then divide that result by the repayment period in years to annualize it. For a $50,000 advance at a 1.3 factor rate repaid over about five months, that works out to roughly a 72% effective APR — use the calculator above to run your own numbers exactly.
What is a typical factor rate for an MCA?
Most MCA factor rates fall between 1.10 and 1.50, depending on your industry, time in business, and card sales volume. A 1.10–1.20 rate is generally reserved for strong, established businesses, while 1.35–1.50 is more common for higher-risk profiles or shorter repayment terms.
How does the holdback percentage work?
The holdback (also called the retrieval rate) is the percentage of your daily or weekly credit and debit card sales that goes toward MCA repayment. If your holdback is 15% and you process $5,000 in card sales on a given day, $750 is automatically remitted to the MCA provider. On slower days you pay less; on busier days you pay more.
What is Effective APR and why does Texas require it?
Effective APR expresses the true annualized cost of your MCA as a percentage. Texas Senate Bill 2677 requires commercial finance providers — including MCA funders — to disclose the APR to borrowers so they can compare costs across different financing products. The APR shown here is an estimate based on your projected repayment period.
Does paying off an MCA early save money?
No. Unlike an interest-bearing loan, the total repayment amount on an MCA is fixed at signing based on the factor rate — there's no declining balance and no interest that stops accruing if you pay faster. Paying early doesn't reduce the total cost; it just means you reach that fixed cost sooner.
How accurate is this calculator?
The calculator provides estimates based on the inputs you enter. Actual daily payments will vary because they are tied to real-time card sales volume. The repayment period and APR are approximations — your actual experience may be faster or slower depending on your revenue.
Can I apply for an MCA through Starting Gate Financial?
Yes! We partner with top MCA providers and can help you compare offers to find the best fit for your business. We recommend exploring all financing options — including business lines of credit and SBA loans — before committing to an MCA.
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