Quick answer: A merchant cash advance (MCA) is priced with a factor rate, usually between about 1.10 and 1.50. You multiply the amount you receive by the factor rate to get your total payback. For example, $50,000 at a 1.30 factor rate means you repay $65,000, so the advance costs $15,000. Because MCAs are repaid over a few months, that cost works out to a high APR, often anywhere from roughly 40% to well over 100%, depending on how fast you repay.
How Merchant Cash Advance Pricing Works
An MCA isn’t a loan. A funder buys a portion of your future sales at a discount, and you repay it from your revenue over time. Instead of an interest rate, there are three numbers to know:
- Factor rate: the multiplier that sets your total cost (for example, 1.25).
- Total payback (purchased amount): the advance multiplied by the factor rate.
- Remittance: how you repay, usually a fixed daily or weekly debit from your business bank account, or a percentage of card sales (the “holdback”).
The cost is set when you sign. Unlike a loan, it usually doesn’t grow with time if repayment takes longer, and it usually doesn’t shrink if you repay early, unless your agreement offers an early payoff discount.
Merchant Cash Advance Cost Examples
Example 1: $50,000 at a 1.30 factor rate over about 6 months
- Amount funded: $50,000
- Total payback: $50,000 × 1.30 = $65,000
- Cost of the advance: $15,000
- Daily payment (about 126 business days): about $516
- Weekly payment instead (26 weeks): $2,500
- Estimated APR: about 107%–109%
Example 2: $100,000 at a 1.20 factor rate over 12 months
- Amount funded: $100,000
- Total payback: $120,000
- Cost of the advance: $20,000
- Weekly payment (52 weeks): about $2,308
- Estimated APR: about 37%
Notice the difference: the second advance has a lower factor rate and a longer term, so its APR is about a third of the first. The shorter the term, the higher the APR for the same factor rate.
| Funded | Factor rate | Total payback | Term | Est. APR |
|---|---|---|---|---|
| $50,000 | 1.30 | $65,000 | 6 months | ~108% |
| $100,000 | 1.20 | $120,000 | 12 months | ~37% |
Why the APR Looks So High
APR spreads the cost over a year. A $15,000 cost repaid in six months is the same dollar amount whether you call it a factor rate or an APR, but the APR makes it look larger because you only had the money for half a year and paid it down every day. That’s why APR is the best way to compare offers, while the total payback is the best way to understand what you’ll actually spend. Our guide to APR vs. interest rate vs. factor rate explains the math.
Other Fees to Ask About
- Origination or underwriting fee: some funders deduct a fee from the amount you receive. Always ask for the net amount that will hit your account.
- Bank or ACH fees for processing payments.
- NSF or returned-payment fees if a debit bounces.
- Default fees if the agreement is breached.
What Affects Your Factor Rate
- Time in business: longer track records usually get better pricing.
- Revenue consistency: steady monthly deposits lower the funder’s risk.
- Existing advances: having other MCAs open usually raises your rate.
- Bank account health: overdrafts and negative days count against you.
- Industry and credit: these matter, but less than revenue.
- Term length: shorter terms often carry lower factor rates but higher APRs.
How to Compare MCA Offers
- Compare the total payback, not just the payment.
- Ask for the net funded amount after fees.
- Check the payment frequency (daily vs. weekly). See daily vs. weekly MCA payments.
- Ask whether there’s an early payoff discount.
- Look at the estimated APR. Several states, including New York and California, require many providers to disclose it.
- Work with a direct funder to avoid extra broker fees.
When a Merchant Cash Advance Is Worth the Cost
An MCA makes sense when the money earns more than it costs. If a $50,000 advance costs $15,000 but lets you buy inventory at a bulk discount and sell it for $90,000 in profit, the math works. If you’re using it to cover ongoing losses, it usually doesn’t. For cheaper options when you qualify, compare an MCA vs. term loan vs. line of credit.
Frequently Asked Questions
What is a typical merchant cash advance factor rate?
Most factor rates fall between about 1.10 and 1.50. Businesses with strong, steady revenue and few existing advances typically get rates toward the lower end.
Can I save money by paying off an MCA early?
Only if your agreement includes an early payoff discount. Because the cost is set up front, paying early doesn’t reduce it automatically. Ask about this before you sign.
Is the cost of a merchant cash advance tax deductible?
In many cases the cost of financing used for business purposes can be treated as a business expense. Talk to your accountant about how to handle it for your business.
Why don’t MCAs have an interest rate?
Because an MCA is a purchase of future receivables, not a loan, it’s priced with a factor rate instead of interest. You can still convert it to an estimated APR to compare it with loans.
How fast can I get a merchant cash advance?
Many businesses are funded within 24–48 hours of approval. See merchant cash advance options from Brookestone Funding, or apply online to see what you qualify for.
See what your business qualifies for
Brookestone Funding is a direct lender serving small businesses nationwide. Apply online in a few minutes — all credit scores considered, no collateral required for merchant cash advances.
- $10K – $2M in funding
- Funded in as little as 24–48 hours
- Decisions based on your revenue, not just your credit score
