The real cost of a merchant cash advance: 2,624 scenarios

Published November 4, 2026 · Data: merchant-cash-advance-cost-study.csv (2,624 rows, CC BY 4.0)

A merchant cash advance is priced with a factor rate: take $50,000 at 1.30 and you repay $65,000. That number says what the advance costs, but not how fast you pay it. We ran 2,624 scenarios through the same formula as our MCA calculator to show what the factor rate leaves out. A factor of 1.30 works out to an estimated APR of 217.1% over three months and 36.6% over eighteen. The study uses pure math and no customer data. Every table below can be rebuilt from the downloadable CSV.

Key findings

1. The factor rate hides the clock. At 1.30 the cost is always $0.30 per $1 advanced, but the estimated APR is 36.6% over 18 months, 54.8% over 12, 109.3% over 6 and 217.1% over 3. Halving the term from six months to three multiplies the APR by 1.99.
2. A "cheap" factor can be the expensive deal. A 1.15 factor repaid over three months (112.9%) costs about twice as much per year as a 1.50 factor repaid over eighteen months (58.2%).
3. Triple digits are common on short terms. Of the 656 daily-payment scenarios without fees, 163 (25%) come out above 100% APR and 530 (81%) above 36%. The lowest is 12.9% (1.10 over 18 months) and the highest is 345.7% (1.50 over 3 months).
4. Staying at or under 36% takes a low factor or a long term. Over 12 months of daily payments, the factor has to be about 1.19 or lower. Over 6 months, it has to be about 1.09 or lower. For comparison, 36% is the cap the federal Military Lending Act sets for covered consumer credit.
5. An upfront fee costs most on short terms. A 3% fee taken out at funding adds 26.7 APR points to a 1.30 advance over three months, but only 4.5 points over eighteen months. In dollars it is the same $1,500 on a $50,000 advance either way.
6. Weekly payments change little. With the same factor and term, the APR on weekly payments is between 0.4% and 5.3% lower (in relative terms) than on daily ones. You hold each dollar a few days longer, but the price stays about the same.

Table 1. Estimated APR by factor rate and term

Daily payments over business days and no fees. Read across a row to see the same price per dollar get more expensive per year as the term shortens.

Estimated APR, rounded to the nearest whole percent. Cost per $1 is the factor rate minus one, so it does not change with the term. All 2,624 rows, including every factor from 1.10 to 1.50 in steps of 0.01 and every term from 3 to 18 months, are in the CSV.

Table 2. One advance, four ways to repay it

A $50,000 advance at a factor of 1.30 ($65,000 total payback), repaid daily or weekly, with and without a 3% fee deducted at funding ($1,500 on $50,000).

The daily payment is the total payback divided by the number of business-day payments. The weekly payment is the same total over 52 payments a year. With the fee, the business receives $48,500 but still repays $65,000.

Table 3. Which factor rate equals a given APR?

Daily payments, no fees. Each cell shows the factor rate that gives exactly that estimated APR for the term in that column. If an offer's factor is above the cell, its APR is higher.

Solved numerically to three decimals. Example: over 12 months, a factor of 1.191 is an estimated APR of 36%. Over 3 months, the same 36% takes a factor of 1.046.

Table 4. What a 3% upfront fee adds

The fee lowers the money you actually receive, while the payback stays the same. That raises the APR, and it raises it most when the money is held for the shortest time.

Daily payments. Cost per $1 received is the total cost (payback minus money received) divided by the money received.

What this means for an owner comparing offers

• Compare the total payback in dollars. This is the one figure no structure can hide. A $50,000 advance at 1.30 costs $15,000 whether it runs 6 months or 12.
• Then look at the term. Two offers with the same factor are not the same price if one takes half as long to repay. The shorter one has the higher payment and the higher APR.
• Ask what is deducted at funding. The dollars that arrive in your account are what the APR is measured against.
• Ask for the estimated APR when it is not shown. Several states now require it on commercial financing offers. Our state disclosure law tracker lists which ones.
• APR is not the whole story. A short, expensive advance can still make sense when the return on the money is fast, for example inventory you will sell within weeks. See what business funding costs and how factor rates work.

Methodology

Every scenario uses a reference advance of $50,000. APR and cost per $1 do not depend on the size of the advance. For each combination of factor rate f, term m months, schedule and fee:

• Periods per year (ppy): 252 business days for daily payments, 52 weeks for weekly payments.
• Number of payments: n = round(m × ppy / 12). For example, 6 months is 126 daily or 26 weekly payments.
• Total payback: advance × f. Payment: total payback / n, equal payments with no rounding.
• Money received: advance × (1 − fee%). The fee is 0% or 3%, deducted at funding.
• Estimated APR: the periodic rate r that makes the present value of the n payments equal to the money received (payment × [1 − (1 + r)⁻ⁿ] / r = money received). It is solved by bisection and annualised as r × ppy × 100. The first payment falls one period after funding. This is a nominal annual rate, the same convention used for US APR figures.
• Cost per $1: (total payback − money received) / money received.

Assumptions: fixed payments for the full term; no early-payoff discount, holdback reconciliation, missed payments or fees other than the one modelled. A merchant cash advance repaid as a percentage of sales has no fixed term, so its real APR depends on how fast sales come in. Our calculator's holdback mode estimates that. The numbers are estimates for comparison, not quotes or offers. The generator script (mca_cost_study_data.py) reuses the calculator's math module, which is tested against textbook annuity values.

Related: MCA calculator · What is a factor rate · Merchant cash advance · MCA consolidation

If you are weighing an offer, or want one to compare, checking your options takes about 60 seconds. It uses a soft credit pull only, there is no cost to apply, and there are no broker fees. Start an application or request a callback.

Common questions

How do you convert a factor rate to an APR?

Work out the payment schedule (total payback divided by the number of payments), then find the periodic rate at which those payments are worth exactly the money you received, and multiply by the number of periods in a year (252 business days or 52 weeks). The factor rate alone is not enough: you also need the term and any fee deducted at funding.

Why does a shorter term raise the APR if the payback is the same?

APR measures cost per year. Paying $0.30 per dollar over three months is about four times the annual rate of paying it over twelve, because you only have the money for a quarter of the time.

What APR is a 1.30 factor rate?

It depends on the term. With daily payments and no fees it is an estimated 217.1% over 3 months, 109.3% over 6 months, 54.8% over 12 months and 36.6% over 18 months.

Is a merchant cash advance legally required to show an APR?

In some states, yes. A growing number of states require an estimated APR or a total cost disclosure on commercial financing offers, including merchant cash advances. The rules differ by state and by deal size; see our state disclosure law tracker. This is not legal advice.

Can I use this data in an article?

Yes. The tables and CSV are published under CC BY 4.0. Credit Silverback Capital and link to this page.