Free tool
What does that merchant cash advance actually cost?
A factor rate hides the real price of the money. Enter the offer and see the total payback, the cost of capital, and an estimated APR you can hold up against a loan.
Drag the slider or type the exact amount.
Most advances price between about 1.1 and 1.5.
Remittance frequency
Daily advances debit on business days only (about 21 a month).
189 daily remittances.
Add it to see how much of your monthly revenue the remittances take.
What it really costs
Total payback
$70,000
Cost of capital
$20,000
$0.40 per $1 advanced
Estimated APR
95.0%
Annualized from the remittance schedule, so you can compare an advance against a loan on the same basis. A factor rate alone hides this, because a shorter term makes the same factor far more expensive.
- Each remittance
- $370.37 / day
- Number of remittances
- 189
- Leaves the account monthly
- $7,778
Estimates from the figures above, for comparison only — not tax, legal, or financial advice. Fees, holdback terms, and early-payoff discounts vary; your signed agreement governs.
How to read it
A factor rate is not an interest rate.
It’s the single most misread number in the advance business. A 1.4 factor rate doesn’t mean 40% a year — it means 40 cents of cost on every dollar, however long the term runs. Repay it over four months instead of twelve and you have paid the same cost for a third of the time, which is why the annualized number can be startling.
Total payback
The advance times the factor rate — the full amount you are obligated to remit, before any early-payoff discount.
Cost of capital
Payback minus the amount funded. This is the number that belongs in your books as financing expense, spread across the term.
Estimated APR
The same cost expressed as an annual rate, so an advance, a term loan, and a line of credit can finally be compared side by side.
Then there’s the part the calculator can’t show you
An advance doesn’t just cost money — it changes how your books have to work. The funded amount is a liability, not revenue. Every remittance splits between principal and financing cost. Get that wrong and your income is overstated, your deduction is missed, and the balance never reconciles to what the funder says you owe. That’s the part we specialize in.
Questions
Factor rates, APRs & the books
The questions merchants and funders ask us most about what an advance really costs.
Multiply the advance by the factor rate to get the total payback, then subtract the advance — that difference is your cost of capital. To compare it against a loan, that cost has to be annualized over the repayment term, which is what the estimated APR above does.
A factor rate is a flat multiplier on the amount advanced — a $50,000 advance at a 1.4 factor rate means $70,000 is repaid. Unlike interest, it doesn't accrue over time and doesn't shrink if you repay early, so the same factor rate costs far more on a short term than a long one.
You can't convert it directly, because a factor rate carries no time dimension. You have to model the actual remittance schedule — the payment amount, how often it's debited, and how many payments there are — and solve for the annualized rate that discounts those payments back to the amount funded. That's the calculation this tool runs.
Because the cost is fixed by the factor rate no matter how quickly you repay. Paying $20,000 of cost over four months is a much higher annualized rate than paying the same $20,000 over twelve — the money is working for you for a third of the time at the same price.
The advance itself isn't taxable income — it's a liability you repay from future receivables. The payments aren't fully deductible either: each one is part principal (not deductible) and part financing cost (generally deductible). Getting that split right on every payment is a bookkeeping job, not a tax-season one.
Record the advance as a liability at the full payback amount, with the factor cost parked in a contra account, then split every remittance between principal and financing cost as you repay. Booking the funded amount as revenue — a common mistake — inflates income and hides the real cost of the capital.
This calculator is provided free by I&S Accountingas an educational tool. Results are estimates based on the figures you enter and standard remittance assumptions — they are not tax, legal, or financial advice, and they don’t account for fees, holdback adjustments, or early-payoff discounts in a specific agreement. Always work from your signed contract.
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