Factoring & MCA Calculator
Factor rate, real APR.
A factor of 1.40 over 9 months sounds like 40%. It's actually closer to 78% APR. We convert factor rates to true APR so you can decide whether the speed-of-funding is worth the cost. Two modes: Merchant Cash Advance and Invoice Factoring.
Factor Rate ≠ Interest Rate
An MCA factor of 1.40 means: for every $1 advanced, you'll repay $1.40 over the term. On a $50,000 advance, you owe $70,000. The "cost" looks like 40% — but you're repaying that over 9 months, not 12, with declining principal pulled daily. The true APR is much higher.
How We Compute APR
The MCA APR formula approximates: APR ≈ ((factor − 1) × 365 / days) × 100 with adjustment for the average outstanding balance over the term. On a 1.40 factor over 270 days: APR ≈ (0.40 × 365 / 270) × 100 ≈ 54% — and that's before adjusting for the daily-debit structure. Our calculator runs the IRR on the actual cash flows: amount in today, daily debits over 270 days. The truth is closer to 78% APR.
When MCAs Make Sense (and Don't)
- Make sense: Bridging a known short receivable (you have a $200k invoice closing in 60 days but payroll today).
- Make sense: Inventory for a confirmed sale where the margin clearly exceeds the cost.
- Don't make sense: Covering operating shortfalls. The daily debit will accelerate the death spiral.
- Don't make sense: When you qualify for a bank or SBA loan and are tempted by speed.
Invoice Factoring vs. MCA
Invoice factoring is structurally cheaper than an MCA because the lender is buying a specific receivable from a creditworthy payer (your customer). Typical fee: 2–4% per 30 days outstanding. Advance rate: 80–90% upfront, balance (less fee) when the customer pays. APR is usually in the 20–50% range — high, but a fraction of MCA cost.
The Stacking Trap
Many MCA borrowers take a second advance to make payments on the first. Then a third to cover the second. By the time it's a fourth, daily debits exceed daily revenue. This is the most common MCA failure mode. If you're considering a stacked advance, stop and call a bankruptcy attorney — they can negotiate or restructure before it gets worse.
Worked Example: $50,000 MCA
- Factor: 1.40
- Total repayment: $70,000
- Cost of capital: $20,000
- Term: 270 days (~9 months)
- Daily payment: $259
- Effective APR: ~78%
Compare that to a 5-year SBA 7(a) at 11%: $1,087/mo, $14,400 total interest. MCA is faster (3 days vs 45+) but costs $5,600 more in absolute dollars and 7× more on an APR basis.