Try the math
What a merchant cash advance costs.
An advance is priced by a factor rate, not interest. Put in the amount, and the rate if somebody has quoted you one.
The arithmetic
- Advance
- $40,000
- Factor rate
- 1.30
- You remit in total
- $52,000
- Cost of the money
- $12,000
An illustration, not a quote: nobody has offered you these terms. Real terms come from a funding partner and depend on your cash flow, and fees can sit on top of the factor rate.
See my optionsBefore you sign
Work out the daily or weekly debit and test it against your thinnest week, not your best one.
How a merchant cash advance works, in fullA worked example
The starting position, written out.
Take the figure the site uses everywhere: a $40,000 advance at a factor rate of 1.30. The calculator multiplies, and that is the whole price.
The $12,000 does not move whether the term is four months or twelve. What moves is the daily debit, and the debit is the number that decides whether the money was a good idea. Halve the term and the daily figure doubles.
Illustration, not a quote
- Advance
- $40,000
- Factor rate
- 1.30
- You remit in total
- $52,000
- Cost of the money
- $12,000
- Over 8 months, 21 working days a month
- about $310 a day
- Over 4 months
- about $619 a day
Nobody has offered you these terms. The figures are the calculator's own arithmetic at its starting position; real terms come from a funding partner.
How to read the result
What the numbers are telling you.
The cost is fixed on day one
A factor rate is not interest. Nothing accrues and nothing falls as you pay it down: 1.30 on $40,000 is $12,000, agreed at signing. That is why there is no APR on this page. An APR describes a balance that shrinks as you repay; this total never shrinks, and stretching a fixed cost over a term gives an annualised figure that changes with the term rather than the price. The advance guide works that comparison by hand.
Turn the total into a debit
Divide what you remit by the working days in the term. Then find the thinnest week in your last twelve months of statements, work out what that week deposited, and see whether the debit clears it with room to spare. If the answer is only yes on an average week, the term is too short for the amount.
Ask for every fee in the same breath
Some contracts take an origination or underwriting fee out of the advance while applying the factor to the full amount. As an illustration, a $1,200 fee on that $40,000 means $38,800 lands and $52,000 goes back, so the money cost $13,200. Two questions, together: what is the total I remit with every fee included, and what actually lands in the account.
Questions
About the arithmetic.
The questions about a merchant cash advance itself, and what a funding partner may look at, are on its page.
Merchant cash advance, in fullWhy does this calculator not show an APR?
Because an advance has no interest rate and no falling balance, and an APR needs both. The total is fixed on the day you sign; the same $12,000 spread over four months or twelve is the same $12,000. An annualised figure is still worth knowing when you compare shapes of money, and the advance guide shows how to work it out and why it is not an APR.
How do I work out the daily debit from a quote?
Multiply the advance by the factor rate to get the total, then divide by the working days in the term. $40,000 at 1.30 is $52,000; over eight months at 21 working days a month, that is 168 days and about $310 a day. Illustration, not a quote. If the remittance is weekly, divide by the weeks instead.
The quote says "1.3" or "30 cents on the dollar." Is that the same thing?
Yes. A factor rate of 1.30, "pay back $1.30 for every dollar" and "30 cents on the dollar" all describe the same arithmetic: the total remitted is the advance times 1.30. If a quote gives a percentage with no term, ask which of these it means before you put it in.
Does the fee change the factor rate?
No, and that is the problem. A fee taken out of the advance leaves the factor on the full amount, so the money costs more than the rate suggests. Put the amount that will actually land in your account against the total you will remit, and read the cost off that.
Is a bigger advance a better deal?
Not in this arithmetic. The calculator multiplies, so twice the advance at the same rate costs twice as much. Whether a partner prices a larger advance differently is the partner’s call and not something I can predict. What I can say is that the daily debit doubles too, and it is the debit you have to carry.
The other shapes
Not the one you meant?
- Try the math
Business line of credit
Interest on what you draw, over the months it takes to clear.
- Try the math
Term loan
A fixed monthly payment, and the total interest over the term.
- Try the math
Equipment financing
The payment on the machine, and what financing adds to its price.
- Try the math
SBA loan
The payment on a long, government-backed term, and the interest over it.
- Try the math
Invoice factoring
Cash now on an unpaid invoice, the fee, and what comes back when it is paid.
Know what you can carry?
Then tell me what you need. About two minutes, no credit pull to start, and the decision stays yours.