Merchant Cash Advance True Cost Calculator
Enter your advance details to see what your MCA is really costing you in APR terms — and how it compares to a business loan.
By LoanLens · Updated February 2026
How MCAs work
A merchant cash advance is not a loan — it is a purchase of your future card revenue. Instead of an interest rate, MCA providers charge a factor rate: a simple multiplier applied to the amount advanced. A factor rate of 1.3 means you repay £1.30 for every £1.00 you receive, regardless of how quickly you repay.
Repayments are taken as a fixed percentage ("holdback") of your daily card takings — typically 10–20%. Because repayment speed depends on your revenue, there is no fixed term. This makes it impossible to calculate a standard APR using conventional methods.
This calculator converts your factor rate into an equivalent APR using your estimated term. This allows a fair comparison against business loans, which are always quoted in APR.
Typical rates in context
| Product | Typical APR |
|---|---|
| Merchant cash advance | 20–100%+ |
| Unsecured business loan | 8–18% |
| Secured business loan | 5–12% |
| Asset finance (HP) | 7–15% |
Rates are indicative and vary by lender, trading history, sector, and security. Source: British Business Bank SME Finance Survey 2024.
When does an MCA make sense?
Despite the high cost, there are legitimate situations where an MCA may be the most practical option:
- Speed: MCAs can fund in 24–48 hours, versus weeks for a bank loan. If you have a short-term cashflow crisis, speed may outweigh cost.
- No fixed payments: Because repayments are linked to revenue, slower months mean lower deductions. This can reduce the pressure of a fixed monthly commitment during quieter periods.
- No collateral required: Businesses without assets to secure against may have limited alternatives.
- Poor credit: Some MCA providers lend to businesses that would be declined by mainstream lenders.
However, if you can qualify for a term loan or asset finance, this will almost always be cheaper. It is worth exploring alternatives before committing.
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Frequently asked questions
Why is the APR so high on an MCA?
Factor rates look modest (e.g. 1.3) but they are applied to the full advance and do not reduce as you repay — unlike interest on a loan. When converted to an equivalent APR, the effective cost is often 40–100% or more, especially on shorter terms.
Can I repay an MCA early to reduce the cost?
Usually not. Because the total repayable is fixed at the outset (advance × factor rate), early repayment does not reduce what you owe — you pay the same total regardless of speed. Some providers offer a discount for early settlement, but this is not standard. Always check your agreement.
What is a holdback percentage?
The holdback (or retrieval rate) is the percentage of your daily card revenue the provider takes as repayment — typically 10–20%. A higher holdback means faster repayment and a higher effective APR. A lower holdback spreads the cost over a longer period but does not change the total you repay.
LoanLens provides information and educational tools, not regulated financial advice. We are not authorised or regulated by the Financial Conduct Authority. Calculator results are estimates based on the information you provide and typical market data. Always seek independent professional advice before making financial decisions.
What is a factor rate — and why it hides the true cost
A merchant cash advance (MCA) provider expresses the cost of borrowing as a factor rate — a simple multiplier applied to the amount advanced. A factor rate of 1.35 means you repay £1.35 for every £1 you borrow, regardless of how quickly you repay.
The problem with factor rates is that they cannot be directly compared to the APR used on standard business loans. A 1.35 factor rate sounds modest, but on a 6-month MCA it typically equates to an effective APR of over 70%. On a 3-month advance, it can exceed 140%. This calculator converts the factor rate to a true annualised cost so you can make a fair comparison.
How the MCA true cost calculation works
The calculator works in three steps:
- It calculates the total cost of the advance (advance amount × factor rate) and the total fee paid (total cost minus advance amount).
- It estimates the repayment period in months using your average monthly card revenue and the holdback percentage — dividing the total repayment amount by monthly collections.
- It converts the periodic cost into an annualised APR using standard loan-equivalent methodology, so you can compare directly with a conventional business loan rate.
When is an MCA expensive?
An MCA is almost always more expensive than a term loan of equivalent size, when compared on a true APR basis. However, MCAs serve a different purpose: they don't require fixed monthly payments, are repaid as a percentage of card revenue, and are available to businesses that might not qualify for a bank loan.
If your business generates consistent card revenue and your true APR exceeds 50–60%, it's worth exploring whether a term loan or revolving credit facility could provide cheaper working capital — especially if your credit profile has improved since you first took the advance.