Merchant Cash Advance True-Cost Calculator
See the true cost of a merchant cash advance — including the APR the offer sheet doesn't show, and why paying it back faster makes that APR higher.
Written by Dorothy Ibrahim, 10+ years in banking & finance
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How we calculate this
This calculator converts a merchant cash advance factor rate into the one number the offer sheet never shows: an APR. A factor rate looks small — 1.30 sounds like 30% — but the cost is a fixed dollar amount collected over just a few months, so the annualized rate is usually several times the factor. It also demonstrates the counterintuitive core of MCA pricing: the faster your card sales repay the advance, the higher your effective APR, because you pay the same fixed cost over less time.
The formulas
- Total repayment
- advance × factor rate
- Total cost
- advance × (factor rate − 1) + upfront feesThis dollar amount is fixed the day you sign — nothing you do later reduces it.
- Monthly remittance
- holdback % × average monthly card sales
- Repayment time
- total repayment ÷ monthly remittance (in months; the last remittance is partial)
- Quick-estimate APR
- ((factor rate − 1) ÷ repayment months) × 12A simple annualization — useful for intuition but it understates the true rate.
- True APR
- the internal rate of return on the actual cash flows: the advance (minus fees) received now, versus each monthly remittance until the total is repaidBecause remittances start immediately and the balance falls fast, the IRR-based APR is higher than the quick estimate.
Worked example
- Say you take a $50,000 advance at a 1.30 factor with a 15% holdback on $60,000/month of card sales, and no upfront fees.
- Total repayment = $50,000 × 1.30 = $65,000, so the fixed cost is $15,000.
- The monthly remittance is 15% × $60,000 = $9,000 — about $2,077/week or $296/day.
- Repayment takes $65,000 ÷ $9,000 = 7.22 months.
- The quick-estimate APR is (0.30 ÷ 7.22) × 12 = 49.85%, but the true APR on the actual cash flows is about 74.75% — deep in the very-high-cost band.
- If card sales doubled, the $15,000 cost would not change; you would simply repay in half the time, and the effective APR would rise well past 100%.
Rates, benchmarks & sources
- The APR is solved from the advance, factor, holdback, and card-sales figures you enter. — Internal-rate-of-return math on your own inputs (no external constants)
- The comparison ranges shown alongside your APR — MCA/RBF commonly 40–350%, versus roughly 10–15% SBA, 8–15% bank term, 15–35% online term. — Industry rule of thumb (benchmarks.ts financingAprRanges)
- Verdict tiers: under 36% "expensive but sometimes rational for very short needs"; 36–100% very high cost; above 100% costs more than almost any alternative. — Rule-of-thumb interpretation bands (spec §7 1.4)
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- Repayment time assumes your card sales stay at the average you entered — real holdback collections are usually daily and fluctuate with sales, so the timeline (and therefore the APR) will vary.
- This is an estimate of the offer you type in, not a quote — actual MCA terms depend on the funder's review of your processing history.
- Displayed APR is capped at ">999%" when near-instant repayment makes the annualized figure explode.
- An MCA is legally a purchase of future receivables, not a loan — this tool computes the APR-equivalent so you can compare it against loans, but the contract terms (reconciliation clauses, personal guarantees, confession of judgment) are not modeled.
- Some states (e.g., California and New York) require commercial-financing cost disclosures; this calculator shows the number such a disclosure would have to contain, but it is not a substitute for the legal disclosure itself.
Frequently asked questions
Why is my APR so much higher than the factor rate?
A 1.30 factor means a fixed 30% fee, but you do not keep the money for a year — in the worked example you repay it all in about 7 months, with big remittances starting immediately. Annualize a 30% fee paid over 7 months on a rapidly shrinking balance and you get roughly 75% APR. The factor rate describes the fee; the APR describes the rate, and only the APR is comparable to other financing.
How can paying it back faster make it more expensive?
Because the cost is fixed the day you sign. Repay $15,000 of cost over 14 months and the annualized rate is moderate; repay the same $15,000 over 4 months and the annualized rate skyrockets. Strong sales do not save you a dollar on an MCA — they only compress the time over which you pay the identical cost, which is exactly what a rising APR measures.
Is a merchant cash advance ever a reasonable choice?
The interpretation bands treat APRs under 36% as expensive but sometimes rational — typically a very short-term need where speed matters more than cost and cheaper credit is unavailable. Above 100% APR, the tool tells you plainly that almost any alternative — SBA Express, a line of credit, invoice factoring, or negotiating terms with your customer — is likely to cost less.
What is the holdback and how does it affect my cash flow?
The holdback is the share of every card settlement the funder takes — 15% in the default example, collected daily in practice. It scales with sales: slow weeks remit less, busy weeks remit more. That flexibility is the one genuine advantage over a fixed loan payment, but plan on losing that slice of every deposit until the full repayment amount is collected.
Will the funder show me this APR before I sign?
Often not — MCA offer sheets typically show the factor rate and remittance, not an annualized rate. Several states (e.g., California and New York) now require commercial-financing cost disclosures for offers in scope, and this calculator computes the number such a disclosure would surface. Whatever your offer sheet shows, this estimate is for comparison; the binding terms are in the contract.
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themoneysheet provides educational estimates, not financial, tax, or legal advice. Figures use published rates and formulas current as of the date shown, but your situation may differ. Consult a qualified professional (CPA, attorney, or licensed advisor) before making financial decisions. Rates shown are estimates; actual offers depend on lender underwriting.