How merchant cash advances work in the US
A merchant cash advance (MCA) is a commercial financing transaction where a business sells a specific dollar amount of its future credit and debit card receivables in exchange for immediate lump-sum working capital. Rather than assessing an annualized percentage interest rate, funders apply a factor rate (buy rate) to calculate the fixed payback amount.
Remittances are collected automatically through split batch processing or daily automated clearing house (ACH) debits tied to card sales volume. During high-revenue trading periods, advances are remitted faster; during slower sales cycles, remittances decrease, aligning debt service with operating cash flow.
Factor rate and estimated cash-flow cost
A factor rate multiplies the advance to estimate the total contractual payback before separate fees. For example, a $50,000 advance at a 1.20 factor rate gives a $60,000 payback, a $10,000 funding charge before other fees.
The annualized cost estimate depends on remittance frequency and the time each payment is collected. This calculator assumes equal payments at the selected frequency and a smaller final remittance where needed. Contract timing and sales-linked collections can differ, so treat the result as an illustration rather than a statutory APR or directly comparable lender disclosure.
Worked example: $50,000 advance at 1.20 factor rate and 15% holdback
For an illustrative $50,000 advance at a 1.20 factor rate, estimated monthly card sales of $40,000 and a 15% holdback imply $6,000 of average monthly remittances. Total payback is $60,000 before fees, so the funding charge is $10,000, or 20% of the advance.
At the selected daily-business-day convention (260 remittances per year), the estimate is 216 payments of about $276.92 and a final payment of about $184.62, for 217 payments in total. With no upfront fee, the estimated nominal annualized cost is about 44.99%. It assumes level remittances; actual sales-based amounts may vary.
Holdback percentages and daily cash management
The holdback is the share of eligible card receipts applied to repayment under the provider’s contract. Enter estimated monthly sales and the quoted percentage to see an average schedule; this tool does not model individual settlements, weekends, refunds, minimums or changing sales.
Compare the estimated remittance with a cash-flow forecast and confirm the sales base, remittance timing, reconciliation process and any minimum payment in the agreement.
Questions to check in a provider quote
Providers set their own application, trading-history, revenue, processor, security and guarantee requirements. The calculator does not assess eligibility, approval likelihood, funding speed, collateral or personal guarantees.
Before accepting an offer, confirm net funds after fees, total payback, collection percentage, remittance frequency, sales reconciliation, default terms and any early-settlement treatment in the written agreement.
Use the right country page
This page uses US terminology and US dollars. Its nominal annualized cost is an estimate based on level payments at the selected frequency and the fee treatment entered; it is not a statutory APR determination. For UK terminology and an effective annualized estimate, use the UK merchant cash advance calculator.
Inputs for the merchant cash advance calculator
Advance amount
Total upfront capital requested from the funding company before any origination deductions.
Factor rate
The decimal multiplier (typically 1.10 to 1.45) that establishes total repayment obligation.
Payback structure
Choose between percentage deductions from daily card sales or setting a fixed target duration.
Estimated monthly card sales
Average monthly credit and debit card revenue processed through your POS system or merchant gateway.
Holdback percentage
The contractually agreed share (typically 10% to 20%) deducted from each batch settlement.
Target payback period
Desired duration in months to clear the advance balance under fixed-term modeling.
Remittance frequency
How frequently receivables are remitted: daily business days (260/year), weekly, or monthly.
Origination or admin fee
Upfront closing or underwriting fee percentage charged by the provider. Enter zero if none.
Fee payment
How origination fees are handled: deducted from advance cash, added to total debt, or paid separately.
CALCULATOR QUESTIONS
US merchant cash advance calculator questions
What is a factor rate on a US merchant cash advance?
A factor rate multiplies the advance to estimate the total contractual payback. For example, $50,000 at 1.20 gives $60,000 before any separate fees. The agreement determines whether an early settlement changes the amount due.
How does the daily holdback deduction work?
Your credit card processor automatically splits your daily batch settlements, forwarding the agreed holdback percentage (e.g. 15%) directly to the funding provider and depositing the remaining 85% into your business operating account.
Does a merchant cash advance require commercial collateral?
Security and guarantee terms vary by provider and agreement. This calculator does not determine whether an advance is secured or whether a personal guarantee is required; review the offer documents.
How is the annualized cost estimate calculated?
The estimate solves for the periodic rate that equates net funds after the entered upfront fee with the projected remittances, including a smaller final payment when needed. It annualizes that rate using the selected frequency. The result assumes level periodic remittances and is not a lender quote or statutory APR.
What happens if card sales slow down during the advance?
If the contract ties collections to card receipts, remittances may vary with eligible sales. The calculator uses average monthly sales and does not project daily variability, minimums, reconciliation or contract charges. Check your agreement for the actual collection and default terms.
Can I receive an early payoff discount on an MCA?
Early payoff treatment depends on the contract. The calculator applies the entered factor rate to estimate total payback and does not assume a discount or rebate; confirm any settlement adjustment with the provider.