Finance Calculator
Merchant Cash Advance Calculator
Estimate the total repayment and effective cost of a merchant cash advance. See daily holdback amounts, estimated repayment timeline, and approximate APR.
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What is Merchant Cash Advance?
A merchant cash advance (MCA) provides upfront funding repaid through a percentage of future card sales. It is not a traditional loan - repayment flexes with revenue, making it popular with retail and hospitality businesses.
How is an MCA calculated?
A merchant cash advance uses a factor rate rather than an interest rate. The total repayable is simply the advance amount multiplied by the factor rate. Repayment is collected as a daily percentage of your card revenue.
The formulas used are:
Total Repayable = Advance Amount - Factor Rate
Cost of Advance = Total Repayable - Advance Amount
Daily Holdback = (Monthly Revenue / 30) - Holdback %
Est. Months to Repay = Total Repayable / (Monthly Revenue - Holdback %)
Effective APR - (Cost / Advance) / (Months / 12) - 100
The effective APR is an approximation to help compare MCA costs against traditional loans. Actual repayment speed varies with card revenue fluctuations.
Assumptions and caveats
- •Monthly card revenue is assumed to remain constant. Actual revenue fluctuations will change the repayment timeline.
- •The effective APR is an approximation only and should not be compared directly to regulated loan APRs.
- •Some MCA providers charge additional fees not included in the factor rate.
- •Daily holdback assumes 30 trading days per month for simplicity.
- •Results are indicative estimates only. Contact a provider for a formal offer.
Worked Example
Scenario
A restaurant receives a merchant cash advance of GBP 25,000 with a factor rate of 1.35. Monthly card turnover is GBP 40,000 and the holdback rate is 15%.
Calculation
- Total Repayment = 25,000 x 1.35 = GBP 33,750
- Daily Card Sales (approx) = 40,000 / 30 = GBP 1,333
- Daily Holdback = 1,333 x 15% = GBP 200
- Estimated Repayment Period = 33,750 / (200 x 30) = 5.6 months
What This Means
The restaurant repays GBP 33,750 in total - the original GBP 25,000 plus GBP 8,750 in fees (a 35% cost). Unlike a loan with fixed monthly payments, the repayment flexes with card revenue - on quiet months the daily deduction falls, on busy months it rises. The effective annualised cost is significantly higher than traditional lending, making MCAs suitable for short-term cash needs rather than long-term financing.
Frequently asked questions
A merchant cash advance (MCA) provides a lump sum of capital to a business in exchange for a percentage of future card sales. It is not technically a loan - it is a purchase of future receivables. Repayment adjusts automatically with your card revenue, making it flexible but often expensive.
A factor rate is a multiplier applied to the advance amount to determine total repayment. For example, a factor rate of 1.30 on a £50,000 advance means you repay £65,000 in total. Factor rates typically range from 1.15 to 1.50.
The holdback is the percentage of daily card revenue that is automatically deducted to repay the advance. For example, a 15% holdback on £500 daily card revenue means £75 per day is withheld. The holdback continues until the total repayable amount is fully repaid.
Technically no. An MCA is structured as a purchase of future card receivables, not a loan. This means MCAs are not regulated in the same way as loans and do not have a fixed repayment schedule - repayment fluctuates with your card sales volume.
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