Merchant cash advance calculator: turn a factor rate into an APR

Why a factor rate is not an interest rate

A merchant cash advance is priced with a multiplier. Take $50,000 at a factor rate of 1.30 and you owe $65,000. The fee is $15,000, which is 30% of what you received, so it is natural to think of it as 30% interest.

It is not, for two reasons.

The cost is fixed, but the time is short. An interest rate is a price per year. Thirty percent for a year and thirty percent for six months are very different prices. Advances are usually set up to be repaid in months, not years.

You do not keep the money. Payments usually start within days of funding, often every business day. Halfway through the term you have already paid back half of the total. On average you have only about half the advance in hand, and you are paying the full fee for it.

Put the two together. That $50,000 advance, repaid in 130 daily payments of $500 over six months, has an APR of about 109%.

The same factor rate means a different APR at every speed.

Read across any row. A 1.30 factor repaid over twelve months is about 55%. Repaid over four months it is about 163%. The provider earns the same $15,000 either way, which is why it would rather be repaid quickly.

Fees change the answer

Most contracts take fees out of the advance before the money reaches you: origination, underwriting, a broker's commission, an ACH setup charge. You repay the full contract amount on a smaller sum received.

On the example above, $1,500 in fees moves the APR from 109% to 123%. Always enter the fees. Ask for them as a dollar figure, in writing, before you compare offers.

For scale

$50,000 borrowed for six months at 13.25% would cost about $1,950 in interest. That rate is the most a lender may charge today on a variable-rate SBA 7(a) loan of that size. The advance in the example costs $15,000, nearly 8 times as much.

That is not a fair fight, and you should know why. An SBA loan takes weeks, needs tax returns and a personal guaranty, and plenty of businesses that are offered an advance would be turned down for one. Speed and a yes are what an advance sells. The comparison shows the price of those two things.

If payments are a share of your sales

A true merchant cash advance is a purchase of your future sales. The provider takes a fixed percentage of each day's card receipts, often called the holdback, until it has collected the payback amount. There is no set term. If sales are slow, payments shrink and the advance takes longer to clear, which lowers the APR. If sales are strong, the reverse.

In practice many agreements collect a fixed daily amount by bank debit, estimated from your past sales. Check your contract for a reconciliation clause, which lets you ask for the daily amount to be adjusted to your actual sales. If the payment cannot move with your sales, the agreement behaves like a loan with a very high rate, whatever it is called.

To use the calculator for a percentage-of-sales advance, enter the daily amount you expect to pay, or the term the provider estimated, and then try a slower and a faster month to see the range.

What the payments do to cash flow

APR is a way to compare prices. It does not tell you whether you can live with the payments.

Use the optional revenue box. The example advance takes $500 every business day, about $10,800 a month. For a business with $60,000 in monthly sales that is 18% of revenue, off the top, before rent or payroll.

This is the road to stacking: taking a second advance to keep up with the payments on the first. Each one is deducted from the same sales. If the payment on a single advance is more than your usual profit margin, a second advance will not fix it.

What the law makes providers tell you

Less than you would expect. The federal Truth in Lending Act, which requires an APR on consumer loans, exempts credit that is primarily for a business purpose. No federal rule requires a merchant cash advance to show an APR.

Some states have stepped in. As of March 2026, ten had laws requiring disclosures on commercial financing: California, Connecticut, Florida, Georgia, Kansas, Missouri, New York, Texas, Utah and Virginia. What they require differs. California and New York require an annual percentage rate. Most of the others require the total cost and the payment terms, but not an APR.

If you are in one of those states, the disclosure form is worth more than the sales call. If you are not, this calculator does the same job.

Can an SBA loan pay off an advance?

Under the rulebook SBA used from June 2025 to September 2026, no: it said flatly that merchant cash advances were not eligible for refinancing. The rulebook has changed, and the answer is now "rarely, and not soon."

Under the version that took effect on October 1, 2026, a merchant cash advance can be refinanced with a 7(a) loan only if three things are true: the agreement has been converted to a term loan, that loan has been amortizing for at least 24 months, and you have taken no further advances since the conversion. An advance that is still active is not eligible. Factoring agreements are not eligible at all.

So an SBA loan is not a way out of an advance you are struggling with today. It can be a second step, two years after you have turned the advance into ordinary debt and stopped taking new ones.

What borrowers say afterwards

In the Federal Reserve Banks' latest survey of small employers, 60% of firms that borrowed from online lenders said their actual borrowing costs turned out higher than they expected. For borrowers at large banks the figure was 32%, and at small banks 37%. The survey's category of online lenders is wider than cash-advance providers, so read it as context, not as a measurement of advances.

Six questions to ask before you sign

1. What is the total payback amount, in dollars?
2. What fees come out of the advance, in dollars, and how much will actually reach my account?
3. Is the payment a fixed amount or a percentage of sales? If fixed, how do I request reconciliation, and how fast must you respond?
4. What happens if I repay early? Is there any discount, or do I owe the full payback amount regardless?
5. Does the contract include a personal guaranty, a lien on business assets, or a confession of judgment?
6. Does my state require you to give me a disclosure with an APR? If so, may I see it before I decide?

Then put the answers in the calculator.

How the APR is calculated

The calculator finds the rate per payment period at which the present value of all your payments equals the cash you actually received, then multiplies by the number of payment periods in a year: 260 for business-day payments, 52 for weekly ones. That is the same nominal convention used to quote a monthly loan. The "effective annual rate" line compounds the periodic rate instead, and is always higher.

Two cautions. State disclosure rules have their own formulas, so a provider's official APR may differ a little from ours. And the calculator assumes equal payments; with a percentage-of-sales agreement the true figure depends on sales nobody can know in advance.

This page is general information. It is not legal advice, and it cannot tell you whether a particular contract is fair or enforceable.