# What does an MCA really cost?

Computes the payback amount, the dollar cost, the number of payments, the term and an estimated APR of a merchant cash advance from the advance, the factor rate, the fee and the daily, business-day or weekly remittance.

- Page: https://www.acalculator.org/finance/mca-calculator
- JSON spec: https://www.acalculator.org/finance/mca-calculator.json
- Version: a982db6834f5

## Default answer

Example with the default inputs (Advance amount $50,000.00, Factor rate 1.35, Fees taken from the advance (optional) $1,000.00, Payments Business days, Payment set by Holdback of sales, Holdback 10%, Sales per month $52,000.00): Paying back $67,500.00 on $50,000.00 costs $18,500.00, an estimated APR of 62.58%.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| advance | Advance amount | The amount the funder advances before any fee is taken out. |
| factor | Factor rate | The number the advance is multiplied by to get the payback amount, such as 1.35. |
| fee | Fees taken from the advance (optional) | Origination or other fees deducted from the advance, so you receive less. |
| every | Payments | How often the funder takes a payment: every day, every business day, or every week. |
| by | Payment set by | A fixed payment amount, or a holdback percent of your sales. |
| holdback | Holdback | The share of your sales the funder takes from each payment period. |
| sales | Sales per month | Your average card or bank sales a month, the base of the holdback. |
| payment | Payment amount | The fixed amount taken each payment. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| apr | Estimated APR | The yearly rate that discounts the payments back to the amount received, by the actuarial method: the rate per payment period × payments a year. |
| payback | Payback amount | Advance × factor rate, rounded half up to the cent. |
| cost | Total cost of financing | Payback amount − advance + fees: the dollars the advance costs. |
| received | Amount you receive | The advance minus the fees. |
| each | Payment | The amount taken each payment. |
| count | Number of payments | Payback amount ÷ payment, rounded up; the last payment is what is left. |
| last | Last payment | The payback amount minus all the full payments. |
| days | Estimated term in days | Calendar days to the last payment: payments × 365 ÷ payments a year, rounded up. |
| perDollar | Cost per dollar received | The total cost divided by the amount received. |

## Method

payback = advance × factor rate; payment = fixed amount, or monthly sales × holdback × 12 ÷ payments a year; payments = ⌈payback ÷ payment⌉; APR = r × payments a year, where r makes the present value of the payments equal the amount received.

## Assumptions

- The payback amount and a holdback payment are rounded half up to the cent; every other step is exact until the display.
- Payments are equal and start one payment period after funding; the last payment is whatever is left.
- Business days are taken as 260 equal periods a year (5 a week), every day as 365, and weekly as 52.
- Sales are steady, so a holdback payment stays the same; real remittances rise and fall with sales, which changes the term and the APR.
- Fees deducted from the advance are part of the cost, as in the California finance charge rule (10 CCR § 943).

## Worked examples

1. advance = $50,000.00, factor = 1.35, fee = $1,000.00, every = business, by = holdback, holdback = 10%, sales = $52,000.00 gives payback = $67,500.00, cost = $18,500.00, received = $49,000.00, each = $240.00, count = 282, last = $60.00, days = 396, apr = 62.582862%, perDollar = $0.38. Source: California Code of Regulations, Title 10, § 940, Calculation of Annual Percentage Rate (actuarial method of Appendix J, 12 CFR Part 1026), https://www.law.cornell.edu/regulations/california/10-CCR-940, retrieved 2026-10-01.
2. advance = $20,000.00, factor = 1.2, every = weekly, by = amount, payment = $1,000.00 gives payback = $24,000.00, cost = $4,000.00, count = 24, last = $1,000.00, days = 169, apr = 78.680388%. Source: California Code of Regulations, Title 10, § 914, Sales-Based Financing Disclosure (finance charge, estimated total payment amount, estimated term), https://www.law.cornell.edu/regulations/california/10-CCR-914, retrieved 2026-10-01; Regulation Z, Appendix J, 12 CFR Part 1026 (https://www.consumerfinance.gov/rules-policy/regulations/1026/j/).
3. advance = $10,000.00, factor = 1, every = daily, by = amount, payment = $300.00 gives apr = 0%, cost = $0.00, count = 34, last = $100.00. Source: Regulation Z, Appendix J, 12 CFR Part 1026 (https://www.consumerfinance.gov/rules-policy/regulations/1026/j/): no finance charge gives a 0% rate.

## FAQ

### How does a factor rate work?

Multiply the advance by the factor rate to get the payback amount. A $50,000 advance at a 1.35 factor rate is paid back as $67,500, so it costs $17,500 before any fees. Unlike an interest rate, the factor rate does not depend on how long repayment takes.

### How do I convert a factor rate to an APR?

Find the rate per payment period that makes the payments, discounted back to the funding day, equal the amount you received, then multiply it by the number of payment periods in a year. This is the actuarial method of Regulation Z, Appendix J. The faster you repay, the higher the APR for the same factor rate.

### Why is the APR of an MCA so high?

The whole fee is paid over a short time, often 6 to 12 months, and you start repaying the next business day. In the default example, $18,500 of cost on $49,000 received, repaid over about 13 months of business days, is an estimated APR of about 62.6%.

### What is a holdback?

The share of your sales the funder collects, such as 10% of each day’s card sales. With steady sales of $52,000 a month and 260 business days a year, a 10% holdback is 52,000 × 10% × 12 ÷ 260 = $240 a business day.

### Is a merchant cash advance a loan?

Usually not in law: it is sold as a purchase of future sales, so federal truth-in-lending rules do not apply. Some states, such as California and New York, require funders to disclose an estimated APR, the finance charge and the estimated term for this kind of sales-based financing.

### Do fees change the cost?

Yes. Fees taken out of the advance mean you receive less but still pay back the full payback amount. The calculator adds them to the cost and uses the amount you actually receive for the APR, as the California finance charge rule does.

### What if my sales change?

With a holdback, a slow month means smaller payments and a longer term, which lowers the APR; a busy month does the opposite. The calculator assumes steady sales, so treat its term and APR as estimates.

## Sources

- Regulation Z, Appendix J to Part 1026, Annual Percentage Rate Computations for Closed-End Credit Transactions (actuarial method; APR = unit-period rate × unit periods in a year), Consumer Financial Protection Bureau, retrieved 2026-10-01. https://www.consumerfinance.gov/rules-policy/regulations/1026/j/
- California Code of Regulations, Title 10, § 940, Calculation of Annual Percentage Rate (commercial financing), retrieved 2026-10-01. https://www.law.cornell.edu/regulations/california/10-CCR-940
- California Code of Regulations, Title 10, § 914, Sales-Based Financing Disclosure Formatting and Contents (funding provided, finance charge, estimated APR, estimated term), retrieved 2026-10-01. https://www.law.cornell.edu/regulations/california/10-CCR-914