Factor rates do not annualize linearly. A 1.35 factor rate over 6 months is roughly 70 percent simple APR. Over 12 months it drops to roughly 35 percent. This calculator converts any merchant cash advance to its effective APR and compares the total dollar cost against bank, CDFI, and invoice factoring alternatives.
Cash you received from the MCA funder
Common range: 1.20 to 1.50. Total payback = advance × factor rate
Time to fully repay the advance via daily debits
Above bank and CDFI rates. Refinance often saves money.
What $50,000 would cost over 9 months at typical alternative-lender rates.
SBA SOP 50 10 8 (effective June 1, 2025) bars SBA refinancing of MCAs. See the non-SBA paths that still work →
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A merchant cash advance is priced as a factor rate, not an interest rate. To compare it to a bank loan or SBA loan, you need to convert the factor rate to an annual percentage rate. Two formulas are useful, and they produce different numbers.
Simple APR assumes the borrower has the full principal outstanding for the full term. This is the figure most MCA broker websites and industry articles cite. It understates the true cost of capital because the borrower is paying down the balance daily, but it gives a quick first-order comparison to term-loan APR.
This is the methodology used in Truth in Lending Act disclosures for installment loans. The daily rate is solved by bisection on the annuity equation, then annualized across 252 business days per year. Reg Z APR runs roughly 1.5 to 2 times the simple APR for typical MCA structures.
Three real-world MCA structures, with the math worked out in dollar terms. Run your own numbers in the calculator above to see how your specific factor rate and term line up.
Reg Z APR figures are computed via the daily-debit annuity equation. Equivalent alternative costs use standard monthly amortization at the indicated APR. Real outcomes depend on borrower credit, time in business, and lender underwriting overlays.
There are two methods. Simple APR uses the formula (cost ÷ principal) × (12 ÷ months in term). For a 1.35 factor rate over 6 months on a $50,000 advance, the cost is $17,500, and the simple APR is ($17,500 ÷ $50,000) × (12 ÷ 6) = 70 percent. The Reg Z-equivalent APR uses the daily-debit annuity equation to solve for the daily rate that equates the debit stream to the advance, then multiplies by 252 business days. The Reg Z figure is materially higher because each daily debit retires part of the balance.
There is no good factor rate in absolute terms. Factor rates typically range from 1.20 to 1.50. A 1.20 factor rate over 6 months is roughly 40 percent simple APR; a 1.50 factor rate over 6 months is roughly 100 percent simple APR. Even the lowest MCA rates are well above conventional bank financing (9 to 18 percent APR) and CDFI loans (8 to 15 percent APR). The right question is whether you can qualify for a cheaper alternative.
Multiply the advance amount by the factor rate to get total payback. Subtract the advance to get the cost of capital. Divide the cost by the advance to get a percentage. Multiply that percentage by (12 ÷ months in term) to annualize. Example: $100,000 advance at 1.40 factor rate over 9 months. Total payback = $140,000. Cost = $40,000. Cost ÷ advance = 40 percent. Annualized = 40 percent × (12 ÷ 9) = 53 percent simple APR.
Simple APR assumes the borrower has the full principal outstanding for the entire term. Reg Z APR is the rate Truth in Lending uses for installment loans: it solves the annuity equation for the discount rate that equates the daily payment stream to the advance amount. Reg Z APR is materially higher (often 1.5 to 2 times the simple APR) because the borrower does not actually have the full principal for the full term. Each daily ACH debit retires part of the balance, which means the effective cost of capital on the remaining balance is higher than the simple-APR calculation suggests.
The daily ACH debit equals total payback divided by the number of business days in the term. Most MCA contracts assume 22 business days per month. For a $50,000 advance at a 1.35 factor rate over 6 months: total payback = $67,500, business days = 132, daily debit = $511.36. Some MCAs use a holdback percentage of daily revenue instead of a fixed debit, which produces variable daily amounts but the same total payback.
Sometimes. SBA SOP 50 10 8, effective June 1, 2025, prohibits using SBA 7(a) or 504 loan proceeds to refinance MCAs. Conventional bank term loans (9 to 18 percent APR for 660+ credit), CDFI loans (8 to 15 percent for 550+ credit), business lines of credit, invoice factoring (B2B only, 1 to 5 percent per 30 days), and asset-based lending all remain available. Whether refinancing actually saves money depends on how much of the original MCA is already paid off and what fees the new product carries. Run the comparison in dollar terms, not rate-spread terms.