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A worked example
| Advance | $50,000 |
|---|---|
| Factor rate | 1.35 |
| Total payback | $67,500, of which $17,500 is cost |
| Over 6 months | 126 debits of $535.71 — about 126% APR, and 22.5% of receipts for a merchant depositing $50,000 a month |
| Over 9 months | 189 debits of $357.14 — about 84% APR, and 15% of the same receipts |
| Simple annualised | 70% at six months, 47% at nine — the number to stop quoting |
Nothing changed between those two rows except the term, and the deal went from unfundable to ordinary. Holdbacks run roughly 8% to 20% of receipts in practice, so the six-month version is outside the band a funder would write and the nine-month version sits in the middle of it. This is why the term on an advance is an output rather than something anyone chooses: it is whatever falls out of a debit the merchant can survive. It is also why the simple cost-over-advance figure is worse than useless — it moved from 70% to 47% on a deal that got cheaper in APR terms by 42 points, so it is not even directionally reliable.
The three calculators
A 1.35 factor rate repaid daily over six months works out to roughly 126% APR — about double the 70% you get from the simple cost-over-advance calculation, because the merchant starts repaying the next business day rather than holding the full advance for the term.
A 12% holdback on a merchant doing $120,000 a month takes about $686 a business day, repaying a $50,000 advance at 1.35 in roughly 4.7 months — and if revenue falls, the term stretches rather than the merchant defaulting.
Fifty leads at $60 with a 60% contact rate, 40% submitted, 50% approved and 33% closed produces two funded deals at about $1,515 each — and at those rates you could pay $246 a lead and still break even.
Every one of these shows its formula, and every one says where it stops being reliable. A calculator that does neither is asking you to quote a number to a merchant on trust — which is a bad habit in a market that has spent three years being legislated at for exactly that.
Questions
Is there a free MCA calculator?
Three of them here, with no signup and no email gate: factor rate to APR, holdback and daily payment, and cost per funded deal on an order of leads. Each one prints its formula on the same page, which matters more than it sounds — a calculator that will not show its working is a number you cannot defend when a merchant or a regulator asks where it came from.
How do you convert a factor rate to an APR?
Multiply the advance by the factor for total payback, divide by the number of debits for the payment, then solve for the periodic rate that discounts that payment stream back to the advance and annualise it. The shortcut everyone reaches for — cost divided by advance, scaled to twelve months — understates by roughly half, because it pretends the merchant holds the full advance for the whole term when repayment starts the next business day.
What is the daily payment on a merchant cash advance?
Total payback divided by the number of business days in the term. A $50,000 advance at 1.35 over six months is $67,500 across 126 debits, or $535.71 a day. Weekends and holidays do not debit, which is why counting 21 business days a month and 252 a year gives a truer payment than calendar days do.
Why is the APR so much higher than the factor rate makes it look?
Because a factor rate contains no time. 1.35 is 1.35 whether the term is six months or eighteen, and those are completely different deals. The APR is what exposes the difference — the same 1.35 is about 126% annualised over six months and about 84% over nine.
What holdback percentage is normal on an advance?
Broadly 8% to 20% of daily receipts. Below that the advance takes too long to clear for a funder to price; above it the merchant cannot make payroll and the file goes into default, which is worse for everyone than a smaller advance would have been.