Why is the APR on an MCA so high?

MCA APR appears high because APR normalizes a flat fee against the time of repayment. A 1.25 factor rate on a 4-month advance converts to roughly 75% APR. The shorter the repayment period, the higher the effective APR — even though the absolute cost is the same.

What is a good factor rate for an MCA?

Factor rates typically range from 1.09 to 1.50. Rates of 1.10–1.20 are considered favorable and usually reflect strong revenue, good credit, and an established business.

Can I pay off an MCA early?

Yes, you can repay an MCA early — but in most standard MCA structures, early repayment does not reduce your total payback amount. You'll still owe the full (advance × factor rate) regardless of repayment speed.

How is MCA holdback different from a fixed daily payment?

Holdback (percentage of daily deposits) flexes with your revenue — you pay proportionally more on good days and less on slow days. Fixed ACH is the same dollar amount regardless of revenue. The holdback structure is generally better for seasonal or variable-revenue businesses.

What's the difference between factor rate and interest rate?

A factor rate is a flat multiplier applied once to the advance amount — it doesn't compound and doesn't change based on repayment speed. An interest rate accrues over time on the outstanding balance, so faster repayment means less total cost.

MCA Factor Rate Calculator | Free Merchant Cash Advance Calculator | OneDay Capital

MCA Calculator

Advance Amount$50,000

$5K$500K

Factor Rate1.25

1.101.50

Average Daily Sales$3,000

Holdback Percentage15%

5%35%

Results

Total Repayment

$62,500

Cost of Capital

$12,500

Daily Holdback

$450

Weekly Holdback

$2,250

Est. Payoff

139d / 4.6mo

Approx. APR

65.7%

APR is approximate and based on estimated payoff timeline. Actual cost depends on funder terms, fees, and daily sales variations.

Understanding MCA Factor Rates & Holdback

What Is a Factor Rate?

Unlike traditional loans that use an annual percentage rate (APR), a merchant cash advance uses a factor rate — a simple decimal multiplier applied to your advance amount. For example, a $50,000 advance with a 1.25 factor rate means you repay $62,500 total. The $12,500 difference is the cost of capital.

Factor rates typically range from 1.10 to 1.50, depending on your industry, revenue consistency, credit profile, and how long you've been in business. A 1.10 factor rate on a short-term advance may be very competitive, while a 1.50 rate on a longer payoff period is substantially more expensive.

What Is a Holdback?

The holdback (also called the retrieval rate) is the percentage of your daily sales that the MCA provider automatically collects as repayment. If your business generates $3,000 per day in card or bank transactions and your holdback is 15%, the provider takes $450 per day until the advance is repaid in full.

Holdback percentages typically range from 5% to 35%. A lower holdback means slower repayment (longer payoff period) but less daily impact on cash flow. A higher holdback means faster payoff but more significant daily deductions. Choosing the right holdback depends on your revenue consistency and cash flow needs.

MCA vs. Traditional Loan: Key Differences

Feature	Merchant Cash Advance	Traditional Bank Loan
Pricing	Factor rate (e.g., 1.25)	APR (annual %)
Repayment	% of daily sales	Fixed monthly payment
Collateral	None required	Often required
Approval speed	Same day to 48 hours	Weeks to months
Credit requirement	Revenue-focused; bad credit OK	Usually 680+ credit score
Cost	Higher effective APR	Lower APR; more requirements

Is an MCA Right for Your Business?

A merchant cash advance can be the right tool when you need capital quickly, have consistent daily revenue (especially card sales), and can't qualify for or wait on a traditional loan. The flexible repayment structure means you pay more when business is good and less when it's slow — which can be a meaningful advantage during seasonal fluctuations.

That said, MCAs carry a higher effective cost than long-term bank loans or SBA programs. Use this calculator to understand your true payoff timeline and approximate APR before committing. If you have good credit, 2+ years in business, and time to wait, an SBA loan or term loan will typically be less expensive. If you need funding this week and your revenue is strong, an MCA from a reputable funder — matched through a platform like OneDayCap — may be the fastest and most flexible path.

How to Use This MCA Calculator

Enter three values to see the complete picture of any merchant cash advance offer:

Advance amount — the total capital you receive upfront
Factor rate — the multiplier applied to your advance (e.g., 1.25 = you repay $1.25 for every $1.00 borrowed)
Holdback percentage — the percentage of daily deposits or revenues remitted to the funder (typically 10–25%)

The calculator computes your total payback amount, daily payment estimate, approximate repayment term, and an estimated APR so you can compare the cost across different funding offers.

Pro tip: Use the APR output to compare an MCA against other funding products like term loans or lines of credit — which are quoted in APR by default.

Understanding MCA Factor Rates

A factor rate is the core cost mechanism in merchant cash advances. Unlike an interest rate (which accrues over time on the outstanding balance), a factor rate is applied once to the advance amount to determine the total repayment — regardless of how fast or slow you repay.

Factor rates are expressed as a decimal multiplier:

1.10: For every $1.00 advanced, you repay $1.10 (10% cost of capital)
1.25: For every $1.00 advanced, you repay $1.25 (25% cost of capital)
1.40: For every $1.00 advanced, you repay $1.40 (40% cost of capital)

Because the total repayment is fixed at the time of the advance, paying early does not reduce the total cost in a standard MCA structure. If you repay a $100,000 advance with a 1.25 factor in 3 months instead of 8 months, you still repay $125,000 — but your effective APR is much higher because you repaid faster.

This is why the calculated APR on an MCA can appear very high — it normalizes the flat cost against the actual time of repayment. A 1.25 factor rate over 4 months is approximately 75% APR; over 8 months, it's approximately 37.5% APR.

Understanding Holdback Percentage

Holdback is the mechanism through which an MCA is repaid. The funder collects a fixed percentage of your daily deposits (typically from your business bank account or credit card processor) until the total payback amount is collected.

10% holdback: If your daily deposits total $5,000, the funder collects $500/day
15% holdback: If your daily deposits total $5,000, the funder collects $750/day
20% holdback: If your daily deposits total $5,000, the funder collects $1,000/day

The critical feature: Holdback scales with your actual revenue. On a slow day ($2,000 in deposits), you remit less. On a strong day ($8,000 in deposits), you remit more. This self-adjusting structure is what distinguishes an MCA from a fixed daily ACH product.

Higher holdback percentages = faster repayment but more cash flow impact. Lower holdback = longer repayment, more breathing room. Funders typically allow some negotiation on holdback within a given offer.

MCA Cost Examples by Advance Size

Advance Amount	Factor Rate	Total Payback	Holdback	Est. Term
$50,000	1.20	$60,000	15%	~4–5 months
$100,000	1.25	$125,000	12%	~6–8 months
$200,000	1.30	$260,000	15%	~6–9 months
$500,000	1.20	$600,000	10%	~8–12 months

Actual terms vary significantly based on revenue consistency, credit profile, and funder. The ranges above are illustrative — your actual offer may differ.

When MCA Costs Are Justified

MCAs are expensive relative to traditional financing — but cost has to be evaluated in context. There are situations where MCA costs are economically rational:

High-ROI deployment: If a $50,000 advance enables a marketing campaign that generates $200,000 in revenue over the repayment period, the 25% factor rate cost is a reasonable business investment
Speed matters more than cost: If you need capital in 24 hours to capture a time-sensitive opportunity, the premium over a term loan may be well worth it
Traditional financing is unavailable: For businesses with credit below 600 or less than 1 year in operation, an MCA may be the only accessible option
Seasonal bridge: Covering operations for 60–90 days between a slow season and a high-revenue period may justify a 1.15–1.20 factor rate

For a comprehensive guide to MCA mechanics and when they make sense, see: What Is a Merchant Cash Advance? Complete Guide.

Merchant Cash Advance Calculator