Merchant Cash Advance Calculator: Turn a Factor Rate Into the APR Your Term Sheet Does Not State
A merchant cash advance is not priced in a rate. It is priced in a factor — a multiplier on the advance — and collected as a daily or weekly debit. Neither number can be compared to anything else a business can borrow. Enter the offer as it is written and this page returns the figure the term sheet leaves out.
This advance carries a true APR of 183.7%. You repay $65,000 on $48,500 that actually reaches your account — $1.34 for every dollar received. Quoted the way the trade press quotes it, the same offer reads 102.1% — that shorthand ignores the balance falling with every debit. The remittance clears it in 84 debits, about 4.0 months. That is 22.1 times the rate a conventional small-business lender would charge, and $15,658 more for the same money over the same period. No factor rate reaches that conventional rate here: the $1,500 deducted before the money arrives is worth 23.6% APR on its own, at a factor of 1.00, before the factor rate is applied at all. Debits take 13.6% of monthly revenue. If deposits fall 30%, this fixed debit does not move: it would take 19.4% of revenue instead of 13.6%.
What you receive, and what you repay
Cost is measured against the money that actually arrives.
The $1,500 deducted at funding is repaid in full but never arrives, so it is cost rather than principal. On its own, at a factor of 1.00, it is worth 23.6% APR.
The two ways this gets annualised
Both are shown so a figure you have met elsewhere can be reconciled rather than argued with.
Total cost divided by the money received, scaled to a year. This is the figure most trade coverage quotes. It ignores that the balance you still have the use of falls with every debit.
The rate that discounts the actual debit schedule back to the money received. This is the convention the Truth in Lending Act uses for consumer credit and the one the state commercial-financing disclosure laws reach for. The effective annual rate, compounding at the same periodic rate, is 523.7%.
Speed sets the price, not the factor
The same offer, repaid at different rates.
| Remittance | Per debit | Term | Simple | True APR | Total cost |
|---|---|---|---|---|---|
| Slower — 0.50× | $387.50 | 8.0 months | 51.0% | 92.3% | $16,500 |
| Slower — 0.75× | $581.25 | 5.3 months | 76.5% | 138.1% | $16,500 |
| This offer | $775.00 | 4.0 months | 102.1% | 183.7% | $16,500 |
| Faster — 1.50× | $1,162.50 | 2.7 months | 153.1% | 274.3% | $16,500 |
| Faster — 2.00× | $1,550.00 | 2.0 months | 204.1% | 363.9% | $16,500 |
Nothing changes down this table except how fast the debit clears the same contract. The dollars paid are identical in every row; the annual cost is not.
If revenue moves
What a downturn does depends entirely on which structure you signed.
Under a fixed debit nothing flexes. The APR and the term do not move at all, and the whole of the shock lands on the share of revenue leaving the account.
What leaves the account
The number that matters most in a bad month.
Enter debits already committed to earlier advances to see the combined burden — that is what stacking does to a business.
Against a conventional loan
The same net funding from a lender that quotes a rate.
No factor rate reaches that lender's cost at this repayment speed: the $1,500 deducted before funding is worth 23.6% APR on its own, at a factor of 1.00.
Settling early
Whether paying it off sooner actually saves anything.
Questions to put to the broker
Generated from the figures you entered, so each one is specific to this offer.
- What is the estimated APR of this advance? My own calculation of the schedule you have quoted is 183.7%.
- You are deducting $1,500 before the money reaches my account, but I repay the full $65,000. What does that fee cover, and is it negotiable?
- This is a fixed debit that does not move with my sales. Is there a reconciliation clause that adjusts it to actual revenue, and what do I have to do to trigger it?
- These debits take 13.6% of my monthly revenue. What is the process if I cannot cover a debit in a given week?
- Does this agreement include a confession of judgment, a personal guarantee, or a UCC filing against my business?
- If I repay early, is any part of the factor rate forgiven, or do I owe the full payback amount regardless of timing?
- Will you put the total dollar cost, the estimated APR and the full fee schedule in writing before I sign?
Month-by-month ledger
Every debit, what is still owed, and the share of revenue it consumes.
| Month | Debits | Taken | Paid to date | Still owed | Share of revenue |
|---|---|---|---|---|---|
| 1 | 21 | $16,275 | $16,275 | $48,725 | 13.6% |
| 2 | 21 | $16,275 | $32,550 | $32,450 | 13.6% |
| 3 | 21 | $16,275 | $48,825 | $16,175 | 13.6% |
| 4 | 21 | $16,175 | $65,000 | $0 | 13.5% |
How the audit works
Three things set the real price of an advance, and only one of them is on the term sheet. The factor rate fixes what you owe. The origination fee fixes how much of the advance you never receive — it is deducted at funding and repaid in full. And the remittance fixes how fast you repay it, which is what actually converts a factor into an annual cost. A 1.30 factor is the same 1.30 whether it repays in four months or eight; the annual cost of it is not. This audit rebuilds the whole cash flow — net funding in, every scheduled debit out — and solves for the rate that reconciles them.
A $50,000 advance at a factor rate of 1.30 with a 3% origination fee, repaid by a $775 daily debit. You owe $65,000. You receive $48,500, because $1,500 is taken at funding. The debit clears the balance in 84 banking days — four months. Total cost is $16,500, or $1.34 for every dollar that reached your account. The true APR is 183.7%. The same $48,500 from a conventional lender at 8.3% over the same four months would cost about $842. The advance costs roughly nineteen times more.
Speed sets the price, not the factor. To cost what a conventional 8.3% loan costs at that same $775 daily debit, the factor would have to be 1.011. Brokers quote 1.30. That gap is the product.
A factor rate is not an interest rate
Interest accrues on a balance that falls as you repay. A factor rate does not: it is fixed at signing against the original advance, so repaying faster does not reduce what you owe by a single dollar.
That is why the same factor produces wildly different annual costs. A 1.30 factor on $50,000 costs 90% a year by the simple shorthand if it clears in four months, and 45% if it clears in eight — the identical contract, at two speeds.
It is also why no factor rate can be compared to an APR without knowing the remittance. A term sheet quoting a factor and a daily debit has stated the price; it just has not stated it in a unit anyone can use.
The two APR conventions, and why they disagree
The figure most widely quoted in trade coverage is the simple annualised cost: total cost divided by the money received, scaled to a year. On the example above that is 90%.
The true APR treats the advance as what it is — a stream of payments against money received up front — and solves for the rate that discounts those payments back to the funding. Because every debit shrinks the balance you still have the use of, that rate is always higher. On the same example it is 183.7%.
The second convention is the one the Truth in Lending Act uses for consumer credit and the one the state commercial-financing disclosure laws reach for. This page reports both, so a figure you have met elsewhere can be reconciled rather than argued with.
Under a holdback, a bad month cuts the APR and hurts more
A percentage holdback takes a fixed share of deposits, so a downturn shrinks the debit. The term stretches, and the annualised cost falls. On the worked example, a 30% fall in deposits takes the APR from 163% to 114%.
Nothing about that is good news. The business still surrenders the same share of every dollar it takes in, and now does so for two and a half months longer. A lower APR here measures a longer illness, not a cheaper loan.
The number that matters in a downturn is the share of revenue leaving the account, which is why this page reports it beside the rate — and adds the debits already committed to earlier advances, because that is what stacking does.
Under a fixed debit, a bad month lands entirely on you
A fixed daily debit does not flex with sales. The APR does not move, the term does not move, and the whole of a revenue shock lands on the share of revenue going out of the door.
In the worked example a $775 daily debit takes 13.6% of revenue at $120,000 a month. At $84,000 a month it takes 19.4%, and the contract has not changed a word.
This is the structure behind most advances now sold as 'daily payment' products, and it is the one to stress-test before signing, not after.
Paying it off early usually costs more, not less
Because the factor is fixed at signing, settling early normally means paying the same total in less time — which raises the effective annual cost rather than lowering it.
An early-payoff discount changes that only if it actually reduces the balance. This page takes the discount you are offered and reports the APR you would actually realise, so 'pay it off early and save' can be checked rather than believed.
A renewal is the same trap with an extra turn: the unpaid balance of the current advance, including cost you have not had the use of, is folded into the new one.
What the disclosure laws already require
California, New York, Utah and Virginia require commercial financing providers to disclose the amount financed, the total cost and — in California and New York — an estimated APR, before a small business signs.
If you are borrowing in one of those states and the offer in front of you has no APR on it, the number is missing from a document that should carry it.
Everywhere else there is no such requirement, which is why the Federal Reserve's Small Business Credit Survey keeps finding that online-lender borrowers are the group most likely to say the cost came in higher than they expected.
What a factor rate costs per year at different repayment speeds
A $50,000 advance with no origination fee, repaid by a level daily debit. The factor never changes down a column. The annual cost changes by a factor of three.
| Factor rate | Total owed | Repaid in 4 months | Repaid in 8 months | Repaid in 12 months |
|---|---|---|---|---|
| 1.15 | $57,500 | 45.0% simple / 85.0% true APR | 22.5% simple / 42.7% true APR | 15.0% simple / 28.5% true APR |
| 1.25 | $62,500 | 75.0% simple / 137.9% true APR | 37.5% simple / 69.3% true APR | 25.0% simple / 46.3% true APR |
| 1.30 | $65,000 | 90.0% simple / 163.4% true APR | 45.0% simple / 82.1% true APR | 30.0% simple / 54.8% true APR |
| 1.40 | $70,000 | 120.0% simple / 212.7% true APR | 60.0% simple / 106.8% true APR | 40.0% simple / 71.3% true APR |
| 1.50 | $75,000 | 150.0% simple / 260.0% true APR | 75.0% simple / 130.6% true APR | 50.0% simple / 87.2% true APR |
'Simple' is total cost over money received, scaled to a year. 'True APR' is the internal rate of return on the actual debit schedule. Both are computed by the same engine that powers the calculator above.
Computed by CalcDomain's revenue-financing-auditor engine and locked by its golden tests.
Assumptions & Limitations
This audit assumes:
- Debits fall at the end of each period, starting one period after funding. This is how the schedules this tool audits are written.
- A daily remittance debits on banking days only — 252 a year, about 21 a month. Weekly is 52, bi-weekly 26, monthly 12.
- Under a percentage holdback, deposits are assumed level month to month at the figure entered. Real deposits are seasonal, which is what the revenue-stress module is for.
- The final debit is a stub: whatever is left after the last full payment.
- Origination and upfront fees are deducted from the advance at funding rather than added to the payback.
- The comparison loan is a fixed-rate amortising loan on the same net funding, with no fees of its own.
It does not cover:
- This audit prices the offer in front of you. It does not tell you whether the funder is licensed, whether the contract is enforceable, or whether an advance is a loan under your state's law.
- It does not model a renewal or refinance, where the unpaid balance of the current advance — including cost you have not yet earned the use of — is rolled into a new one.
- It does not price a confession of judgment, a personal guarantee, a UCC lien, or a default rate, all of which can matter more than the APR.
- Reconciliation clauses that adjust a fixed debit to true up against actual revenue are not modelled; enter the debit you are actually being charged.
- It is not legal advice and not a determination that any rate is usurious.
Evidence, sources and editorial review
Merchant Cash Advance Calculator: Turn a Factor Rate Into the APR Your Term Sheet Does Not State groups its evidence and methodology review here so sources, assumptions and responsibility can be checked together.
Methodology
The advance's payback is the advance multiplied by the factor rate, or the payback figure quoted on the term sheet — either way the implied factor is shown. Origination and upfront fees are deducted from the advance to give the net funded amount, because cost is measured against the money that actually reached the business, not the figure printed on the offer. The remittance schedule is reconstructed from the debit amount and frequency (daily schedules use 252 banking days a year), or, under a percentage holdback, from the holdback applied to monthly deposits. The number of debits is the payback divided by the debit, with the remainder as a final stub payment. The true APR is the internal rate of return of that exact cash flow — net funding received at time zero, then every scheduled debit at period end — solved by bisection and annualised by the number of periods in a year; the effective annual rate compounds the same periodic rate. The simple annualised figure reported alongside it is the trade-press shorthand (total cost over net funding, scaled to a year) which ignores that the balance amortises with every debit, and is always the lower of the two. The revenue-stress module re-solves the whole schedule at changed deposits. The comparison loan applies the fixed-rate PMT formula to the same net funding, both over its own term and over the advance's implied term. The break-even factor rate bisects for the factor at which this offer's APR would equal the comparison rate. Every figure is locked by golden tests that run on each build.
Reviewed according to the CalcDomain Editorial Policy & Calculator Methodology. We document formulas, edge cases, sources, update dates, and correction paths for calculator pages.
If a figure or a source here is wrong, use the feedback control on this page with the term-sheet values you entered. Corrections are made against the primary source, the golden tests are updated in the same change, and the version history below records what moved.
Updated
References & Authoritative Sources
- Federal Reserve Banks — 2026 Report on Employer Firms: Findings from the 2025 Small Business Credit Survey · consulted August 28, 2026 · 60% of firms that borrowed from online lenders reported borrowing costs higher than expected, against 37% at small banks and 32% at large banks.
- Office of the New York State Attorney General — Attorney General James Announces $1 Billion Settlement with Predatory Lender · consulted August 28, 2026 · $1.065 billion judgment against Yellowstone Capital over loans disguised as merchant cash advances at rates up to 820%; $534.5 million of debt cancelled for more than 18,000 small businesses.
- National Federation of Independent Business — Small Business Economic Trends — actual interest rate paid on short-term loans · consulted April 30, 2026 · Source of the default comparison APR.
- Board of Governors of the Federal Reserve System (H.15), via FRED — Bank Prime Loan Rate (DPRIME) · consulted May 15, 2026 · Rate-environment anchor for the comparison loan.
Data Sources & Rate Benchmarks
The NFIB rate sets the default comparison APR — what small firms actually pay on short-term loans — and the Federal Reserve prime rate anchors it to the wider rate environment. These are reference benchmarks, not an offer: what a particular business is quoted depends on its credit, its lender and its trading history.
Frequently Asked Questions
How do I convert a factor rate to an APR?
You cannot do it from the factor alone — you need the repayment speed. Multiply the advance by the factor to get what you owe, subtract any fee deducted at funding to get what you receive, then work out how many debits clear the balance. The APR is the rate that reconciles the money received with that stream of debits. Enter all four on this page and it does the arithmetic.
Why is your APR higher than the one I read somewhere else?
Most published figures use the simple shorthand: total cost divided by money received, scaled to a year. That ignores the fact that the balance you still have the use of shrinks with every debit. The amortised APR is always higher — often about double at MCA speeds. This page reports both, side by side, so you can see which convention produced which number.
Is a merchant cash advance a loan?
Funders structure them as a purchase of future receivables specifically so that lending and usury rules do not apply. Courts and regulators have not always agreed. In January 2025 the New York Attorney General obtained a $1.065 billion judgment against Yellowstone Capital over advances the state characterised as disguised loans at rates reaching 820%, cancelling $534.5 million owed by more than 18,000 businesses.
Does paying off an advance early save money?
Usually not. The factor is fixed at signing, so unless the contract gives a genuine discount on the outstanding balance you pay the same total in less time, which raises the effective annual cost. Enter the month you would settle and any discount offered, and this page shows the APR you would actually realise.
What is holdback stacking and why does it matter?
Stacking is taking a second or third advance while the first is still being debited. Each has its own daily draw, and together they can take a quarter or more of revenue before the business pays a supplier. Enter the debits already committed each month and this page reports the combined share of revenue, not just this advance's share.
My revenue is seasonal. How does that change the cost?
It depends entirely on the structure. Under a percentage holdback the debit shrinks with deposits, so the term stretches and the annualised rate falls — while the same share of every dollar keeps going out, for longer. Under a fixed daily debit nothing flexes and the whole shock lands on your cash position. Set the revenue-stress input to model both.
Is my funder required to show me an APR?
In California and New York, commercial financing disclosure laws require an estimated APR before you sign; Utah and Virginia require disclosure of cost though not an APR in the same form. In most other states there is no requirement at all, which is why the Federal Reserve's Small Business Credit Survey finds online-lender borrowers are the group most likely to report costs higher than they expected — 60%, against 37% at small banks.
What should I compare an advance against?
The honest comparison is the same net funding from a conventional source over the same period. This page defaults the comparison rate to the NFIB's measured average rate actually paid by small firms on short-term loans, and shows the cost both over the advance's own implied term and over a realistic loan term, because those answer different questions.
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Update history
Last updated .
| Date | Version | Change |
|---|---|---|
| 2026-08-28 | 1.0 | First release: factor-rate-to-APR audit with fee-adjusted net funding, IRR-based true APR, revenue-stress sensitivity, stacking burden, conventional-loan comparison, break-even factor rate and early-payoff analysis |