Work out what a merchant cash advance really costs
Enter the advance, the factor rate, your holdback percentage and your average monthly card takings. The calculator returns the total repayable, the cost of the advance, your estimated monthly repayment and roughly how long it takes to clear. Indicative only, not a quote.
The APR-equivalent is an indicative comparison figure only. A merchant cash advance is not a loan, it has no APR, and the real term moves with your card sales. Every figure here is indicative.
These figures are indicative. Funders quote your exact factor rate against your card statements.
How the merchant cash advance maths works
A merchant cash advance is priced with two numbers and nothing else: the factor rate, which sets what you owe in total, and the holdback, which sets how fast you pay it. Everything the calculator does follows from those two.
The first line is simple multiplication. Advance multiplied by factor rate gives the total repayable. There is no compounding, no daily interest accrual and no balance that shrinks the rate as you pay down. The number is fixed the day you sign, so paying early does not save you anything unless the funder offers an early settlement discount in writing.
The second line is your holdback. Your card acquirer or the funder takes an agreed percentage of every card payment, so if you hold back 12% of £25,000 of card sales in a month, £3,000 goes towards the advance. Divide the total repayable by that monthly collection and you have the estimated term. Because your card sales are not identical every month, treat the term as a range rather than a date, and see the repayment timeline calculator if you want to model a seasonal trading year month by month.
What a factor rate actually is
A factor rate is a multiplier, not an interest rate. A factor rate of 1.25 means you repay £1.25 for every £1 advanced, whether that takes you four months or fourteen. Interest rates accrue against a reducing balance over time, which is why a business loan gets cheaper if you clear it early and a merchant cash advance usually does not. This is the single most misunderstood part of the product, and it is worth reading our explainer on what a factor rate is before you sign anything.
The rate you are offered is driven by how predictable your card sales look. Consistent card payments across twelve months of statements, a decent trading history and a sector the funder understands will pull the factor rate down. Thin trading history, volatile takings, a recent county court judgment or bad credit will push it up. Funders care far more about the card takings than about your credit file, which is why eligibility is often easier here than for a business loan.
A worked example
Take a cafe with £25,000 of monthly card sales that needs £20,000 for a kitchen refit. The funder offers a factor rate of 1.25 and a 12% holdback.
- Total repayable: £20,000 multiplied by 1.25, which is £25,000.
- Cost of the advance: £5,000.
- Monthly collection: 12% of £25,000, which is £3,000.
- Estimated term: £25,000 divided by £3,000, which is roughly 8.3 months.
- Indicative APR-equivalent: £5,000 of cost on £20,000 over 8.3 months annualises to about 36%.
Now change one input. If the cafe has a bad quarter and card sales fall to £18,000 a month, the monthly collection drops to £2,160 and the term stretches past eleven months. The cost does not change, because the factor rate fixed it. That is the trade the product makes: your cash outflow flexes with trade, but the total does not.
Why the APR-equivalent is only a comparison figure
The calculator annualises the cost over the estimated term so you can hold a merchant cash advance up against a business loan, invoice finance or a revolving facility on something like a common scale. It is a rough conversion, not a legal APR. Because it divides by the estimated term, a shorter term makes the same cost look more expensive, and a longer one makes it look cheaper, even though you pay exactly the same. If you want the full explanation of where this comparison breaks down, read factor rate versus APR and our side by side of a merchant cash advance versus a business loan.
What this calculator cannot tell you
It cannot tell you whether the factor rate you have been quoted is competitive, because that depends on offers you have not collected yet. It cannot see arrangement fees, origination fees or early settlement terms, so ask every funder whether the factor rate is the entire cost. It cannot model a funder that takes a fixed daily debit rather than a true percentage holdback, which is a materially different product. And it is not a quote: the figures are indicative, based only on what you typed, and no funder is bound by them.
If you are still choosing a funder, compare the market first. Our roundup of the best merchant cash advance providers in the UK sets out who lends to whom, and the factor rate calculator lets you work backwards from a total repayable figure to the factor rate a funder is actually charging you. Working capital decisions are easier when you have three offers to compare rather than one.
Merchant cash advance calculator FAQs
How do you calculate a cash advance?
You multiply the advance by the factor rate to get the total repayable. An advance of £20,000 at a factor rate of 1.25 means £25,000 repayable, so the cost of the advance is £5,000. The term is then whatever it takes for your holdback to collect that £25,000, so it depends on your card sales rather than a fixed schedule. All figures produced here are indicative.
How does a merchant cash advance work?
A funder buys an agreed slice of your future card sales at a discount. You receive a lump sum up front, then the card acquirer or the funder takes an agreed holdback percentage of every card payment until the total repayable is met. Because the holdback is a percentage rather than a fixed sum, a quiet month costs you less in cash than a busy one, and the term stretches or shortens with trade.
How much is a merchant cash advance fee?
The fee is expressed as a factor rate rather than an interest rate, and UK factor rates typically sit somewhere between 1.10 and 1.50 depending on card sales volume, trading history, sector and the size of the advance. A factor rate of 1.25 on £20,000 is an indicative cost of £5,000. Ask any funder whether that factor rate is the whole cost or whether an arrangement or origination fee sits on top.
Is a merchant cash advance a line of credit?
No. A line of credit is revolving, so you draw, repay and redraw against a limit. A merchant cash advance is a single lump sum against future card sales, and once it is cleared you have to apply again or take a renewal. It is also not a business loan, so it has no APR, no fixed monthly instalment and no set end date.
Is the result from this calculator a quote?
No. Every figure on this page is indicative and based on the assumptions you type in. Real pricing depends on your card takings history, the acquirer you use, your trading record and the funder. Use the calculator to sanity check an offer you have already been given, or to work out roughly what a given factor rate would cost you.