1. What is Merchant Cash Advance?

A Merchant Cash Advance (MCA) is a financing option where a business receives a lump sum payment in exchange for a percentage of future sales. The repayment is calculated using a factor rate rather than an interest rate.

2. How Does the Calculator Work?

The calculator uses the MCA repayment formula:

Where:

• \( \text{Advance} \) — The initial funding amount received
• \( \text{Factor Rate} \) — The multiplier used to calculate total repayment

Explanation: The factor rate is a decimal number (typically between 1.1 and 1.5) that determines the total amount you'll repay on the advance.

3. Importance of MCA Calculation

Details: Accurate MCA repayment calculation helps businesses understand the true cost of funding, compare different financing options, and plan cash flow effectively.

4. Using the Calculator

Tips: Enter the advance amount in dollars and the factor rate as a decimal. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical factor rate range?
A: Factor rates typically range from 1.1 to 1.5, depending on the business's risk profile and the provider.

Q2: How is MCA different from a traditional loan?
A: MCAs are based on future sales rather than credit history, have faster funding times, and use factor rates instead of interest rates.

Q3: Are there additional fees with MCAs?
A: Some providers may charge origination fees or other costs. Always review the complete terms before accepting an advance.

Q4: How quickly do I need to repay an MCA?
A: Repayment terms vary, but typically businesses repay through a percentage of daily credit card sales over 3-18 months.

Q5: Can I pay off an MCA early?
A: Some providers allow early repayment, but may charge prepayment fees. Check your agreement for specific terms.