Convert factor rate and holdback percentage into total repayment, daily remittances, payback period, and an APR-equivalent so you can compare an MCA against a term loan on equal footing.
Frequently Asked Questions
What is a merchant cash advance?
An MCA is a lump-sum advance against future business revenue, repaid as a fixed percentage of daily card sales (holdback) or fixed daily/weekly ACH remittances. It's priced with a factor rate, not APR.
What is a factor rate?
A multiplier (typically 1.15–1.50) applied to the advance amount to determine total repayment. A $100,000 advance at a 1.30 factor rate means you repay $130,000 — regardless of how fast you pay it back.
What is holdback percentage?
The percentage of daily card sales the funder withholds to repay the advance. Typical holdbacks run 8–20% of daily sales.
How is MCA APR calculated?
Convert factor rate to total cost, divide by advance amount and payback period, then annualize. MCAs typically equate to 40–150% APR depending on factor rate and speed of repayment.
Is an MCA a loan?
Legally, no — an MCA is a purchase of future receivables, not a loan. That's why it uses factor rate instead of APR and isn't subject to most state usury caps.
Can I pay off an MCA early?
You can prepay, but most MCAs do not offer interest savings — the full factored amount is owed. Some funders offer prepayment discounts; always ask before signing.
What credit score is required for an MCA?
MCAs are revenue-based, not credit-based. Most funders approve 500+ FICO if monthly business revenue is $10,000+ and the business has been operating 6+ months.
How fast does an MCA fund?
Same-day to 3 business days. Speed and minimal paperwork are the main reasons businesses choose MCAs over term loans.
Are MCAs tax deductible?
MCA costs (the factor rate margin) are deductible as a business expense. Consult your tax advisor for treatment specific to your structure.
When does an MCA make sense?
When you need fast capital for a clear revenue-generating opportunity, your daily card sales are strong and predictable, and you've exhausted lower-cost options. Avoid stacking multiple MCAs.