What does your MCA really cost?

What this tells you

A factor rate looks small. 1.35 sounds like a small markup, but the real price depends on how fast you repay and how much cash lands after fees. This page puts that into dollars.

The purchased amount is what you agree to repay. The cash that lands is the funding minus any fees. The gap between them is the dollar cost of the advance.

The APR shown is an estimate of what the cost would be as a yearly rate if this were a loan. An MCA is not a loan, and the funder does not have to quote an APR. It is useful for one thing: lining the cost up against a loan or a card.

Because MCA terms are short, the APR can be many times the factor rate's first impression. A short term does not make the cost smaller, it makes the yearly rate look bigger.

How it is worked out

• Purchased amount = funding × factor rate.
• Cash that lands = funding − fees.
• Dollar cost = purchased amount − cash that lands.
• Number of payments = purchased amount ÷ payment, rounded up. The last payment can be smaller.
• Term: daily payments are counted as 21 business days a month, weekly payments as 52 ÷ 12 weeks a month.
• Estimated APR: find the rate per period that makes the payments worth exactly the cash that lands, then multiply by 252 (daily) or 52 (weekly). It is labeled as an estimate because an MCA is not a loan.

Common mistakes

• Using the cash you expected instead of the cash that landed. Fees come out first.
• Mixing up the factor rate with an interest rate. They are different things.
• Typing a weekly payment as daily, or the other way round. Pick the frequency in your agreement.
• Forgetting that the payment can change if the agreement is reconciled. This tool uses a fixed payment.
• Comparing this APR with a loan APR as if they were the same product. Use it as a rough yardstick.