MCA Calculator is a business financing tool that helps you understand the true cost of a merchant cash advance. This tool is especially useful for small-business owners seeking short-term funding because it allows you to evaluate the impact of an MCA on your cash flow and weigh its benefits against its costs before making a commitment.
An MCA, or merchant cash advance, is a type of business financing that doesn’t require a fixed loan repayment schedule. Instead, the business owner sells a portion of their future revenue in exchange for money up front. The MCA company then collects their share by deducting a percentage of the business’s daily sales. The calculator below estimates the total amount of sales that will be withheld from a business’s account in order to repay the MCA lender and how long it will take to pay back the advance.
Using an MCA calculator is one of the best ways to determine the true cost of an MCA and compare it to other types of business financing. This calculator will help you estimate the following metrics:
Annual Percentage Rate (APR): This is an important metric because it allows you to compare the MCA’s financing costs with other types of business loans. The APR is also a helpful indicator of whether the MCA is a good or bad deal for your business.
Estimated Monthly Credit/Debit Card Sales: This is an estimation of how much credit/debit card sales your business will generate each month. The MCA company will base their repayment on your estimated monthly sales, and this number will be used to calculate the amount of sales that will be withheld each day. The daily payment amount will fluctuate, but it will provide you with a rough idea of how much you’ll have to pay every day until your MCA is paid off.
The MCA Calculator also shows you the amount of fees — called “factor rates” in the industry — that will be applied to your advanced amount. This fee structure is different from other types of lending, as it is based on the amount of the advance, not a percentage of declining principal. This can make the math of an MCA confusing for some small-business owners. The calculator will show you the factor rate and total advance fee in dollars, so that you can see how it’s being calculated.
In addition to the aforementioned metrics, the MCA Calculator will also display the cents on the dollar costs (the amount you pay in fees per dollar borrowed) and an approximate number of days it will take you to repay your MCA. It’s important to note that the actual number of days will fluctuate, as it depends on how much your business’s credit/debit card sales will decrease or increase during the repayment period. This is another reason why it’s so crucial to thoroughly evaluate all of your financing options before committing to an MCA. The more you know about your MCA, the better equipped you will be to make a confident decision that aligns with your business’s financial goals and long-term stability.