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Merchant Cash Advance (MCA) Calculator

Do I Qualify?

  • Over 6 months in business
  • Annual revenue exceeding $160,000
  • Credit score of 575 or better

Get pre-approved today, so you have the funds you need tomorrow

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Table of Contents

  • Merchant Cash Advance Calculator: Find Your Borrowing Costs
  • Fundamentals: What It Is & How It Works
  • What Is a Merchant Cash Advance?
  • Using the MCA Calculator
  • When to Consider an MCA
  • Final Thoughts

Merchant Cash Advance Calculator: Find Your Borrowing Costs

Sometimes a short-term expense puts a small business owner in need of immediate cash. While a loan might seem like the obvious solution, the timing, terms and conditions don’t always fit the needs of a small business owner. But there is another financing option available: the merchant cash advance (MCA).

If you’re considering this form of financing, start here with our MCA calculator. By plugging a few numbers into this easy-to-use tool, you’ll come away with a better understanding of what your repayments might look like and the total cost of borrowing.

Get to the Bottom Line of a Merchant Cash Advance with the MCA Calculator

The fee and repayment structures of MCAs can make them difficult to understand. What’s more, contracts are often loaded with unfamiliar terms. So before you use our MCA online fee calculator, it’s important to understand the logic behind the numbers. Here’s what you need to know:

What Is a Merchant Cash Advance?

An MCA is not a loan, but an advance. When you enter into an agreement with an MCA lender, you receive a sum of cash in exchange for a percentage of your future sales.

In years past, MCAs were most commonly used by restaurateurs and retailers whose revenue came primarily from credit and debit card sales. In this traditional form of MCA financing, a lender advances a small business a sum of cash and that debt is repaid by remitting a percentage of daily credit and debit card sales, known as a “holdback,” to the lender.

Because the remittance is taken as a percentage, the amount sent to the funder rises and falls as sales fluctuate. 

While this form of MCA funding is still in use today, it has been eclipsed by its modern-day equivalent: the ACH merchant cash advance.

What Is an ACH Merchant Cash Advance?

An ACH advance is similar to a merchant cash advance. The primary differences are how lenders assess funding worthiness, how the terms are structured and how the advance is repaid.

Instead of reviewing an applicant’s credit card processing statements to decide whether or not to fund, and how much, an ACH MCA lender will review the small business’s deposit and cash flow statements to calculate the advance amount.

The advance is then repaid through daily or weekly debits from the business’s bank account, known as Automated Clearing House (ACH) withdrawals. These remittances are fixed and occur over a set term, usually ranging from 3 to 18 months.

Because ACH advances are based on a business’s overall sales, its applicable to all small business owners — not just those with high credit and debit card sales.

Now that we’ve defined merchant cash advance and its variations, let’s examine its fee structure.

Merchant Cash Advance Fee Structure

Merchant cash advance fees are calculated using a “factor rate.” Because factor rates aren’t used in consumer lending, many business owners are less familiar with this fee structure and how it’s calculated. So let’s take the time to define it here.

Factor rates are expressed as a decimal figure rather than a percentage, and typically range from 1.10 to 1.30. The factor rate is used to calculate the MCA fee, which is a percentage of the original advance amount, not a fee based on depreciating principal. For this reason, the cost of MCA financing remains the same, whether you pay off an advance in 3 months or 6.

How to Calculate MCA Factor Fees

Say you get a $20,000 cash advance at a 1.20 factor rate. To determine how much you will pay back to the MCA provider, multiply the cash advance amount by the factor rate.

In this instance, the calculation would be: $20,000 X 1.20 = $26,000

You would pay $26,000 to the MCA provider for borrowing $20,000. That means the cost of the advance is $6,000.

How Lenders Determine MCA Factor Rates

Unlike other short-term funding options, the creditworthiness of your business holds less clout when determining advance amounts and factor rates. What’s most important in MCA financing is projected sales. As a result, you can expect lenders to perform a thorough examination of your company’s deposit, credit card processing and cash flow statements.

In addition, a lender will consider:

  • Industry: Different industries present different levels of risk to MCA providers. For example, sectors that routinely experience periods of high and low sales are riskier for lenders to work with, resulting in potentially higher factor rates.
  • Length of Time in Business: Most MCA lenders require small businesses to be in operation for a minimum of 6 months. Typically, the younger the business, the higher the factor rate.
  • Business Sales and Growth: An MCA provider will perform a financial assessment of your ability to repay the advance. As MCAs are based on future revenues, showing consistent sales and a proven history of growth bodes well for favorable rates and terms.
  • Business Credit History: Because an MCA is an advance, your business’s credit score is less of a deciding factor, but it still comes into play. In general, the better your business credit score, the lower your factor rate.

Your business’s industry, age and sales and growth are considered when determining the MCA Factor Rates.

Use the Merchant Cash Advance Calculator to Estimate Payments

Now that we’ve provided background for the MCA online calculator, here’s how to get the most out of the tool. (Before you get started, it’s important to note that this calculator is for ACH transactions only.) 

Step 1: Enter the desired advance amount into the MCA fee calculator. 

Step 2: Enter the estimated factoring rate. These rates typically fall within the 1.10 to 1.30 range.

Step 3: Select the estimated term in the MCA fee calculator. The typical repayment period for a merchant cash advance is 9 months. But the term can be as short as 3 months and as long as 24 months.

Step 4: Calculate. The ACH merchant cash advance APR calculator will output:

  • Estimated Remittance Payment. You can toggle between a daily or weekly frequency.

We encourage you to experiment with different advance amounts, factor rates, terms and remittance frequency using the MCA online calculator. This way, you have a full understanding of the potential cost of funding—and what your cash flow can and cannot bear.

When to Consider a Merchant Cash Advance

Merchant cash advances make the most sense as a financing option for short-term cash flow issues, such as making payroll or rent. However, they can be used for many business expenses, including financing a piece of equipment, purchasing inventory or pursuing a time-sensitive opportunity.

Before moving forward with a merchant cash advance, take a hard look at your sales projections and cash flow. An MCA is only a good fit for your business if you’re confident you can satisfy the daily or weekly remittance with enough cash left to run your business and fulfill your other financial obligations.

Weigh Financing Options with Merchant Cash Advance and Loan Calculators

As you consider your opportunities, a small business loan calculator is a great place to start. By gaining an understanding of your estimated payments and the total cost of borrowing, you can easily compare lending types, calculate fees and make an informed funding decision.

Ultimately, the right financing option for your small business will depend on your unique needs and your qualifications. If you need fast access to capital, a merchant cash advance may be the right funding option for you.