Free tool: true cost
MCA vs. factoring calculator
The short answer
A merchant cash advance with a 1.35 factor rate repaid daily over six months works out to an estimated APR above 100%, while factoring the same cash need commonly runs far lower and takes nothing from your bank account each day. Enter your MCA terms to see its estimated APR, total cost and cash drain next to factoring.
Results
You’d net $97,000 from this MCA and repay $135,000 in 126 daily payments of $1,071.43, a cost of $38,000 and an estimated APR of 139.5%. Raising the same cash by factoring about $114,118 of invoices would cost roughly $23,141 over the same 6.0 months, with no debits from your account.
MCA
- Cash you receive
- $97,000
- Total payback
- $135,000
- Cost of money
- $38,000
- Est. APR
- 139.5%
- Drain per business day
- $1,071.43
- Payments
- 126
Factoring
- Cash you receive
- $97,000
- Invoices to sell
- $114,118
- Cost over term
- $23,141
- APR
- 47.7%
- Drain per business day
- $0
- Fee per turn
- 5.00%
Total cost over 6.0 months
Annualized cost
Cash pulled from your account
MCA APR is the internal rate of return on your actual cash flows (net funding in, fixed payments out), times 252 business days. Factoring cost assumes you keep the full amount funded for the whole term, which overstates it. Estimates only, not an offer.
Stuck in daily debits? If you invoice businesses or agencies, a funder may be able to take out the MCA.
Get matched with a funderHow do you calculate the APR of a merchant cash advance?
Treat the MCA as a stream of cash flows. The net funding you actually receive, after origination and other upfront fees, is the money in. Every daily or weekly payment is money out. The internal rate of return (IRR) is the periodic rate that makes those flows net to zero. Multiply it by the number of payments in a year (252 business days or 52 weeks) for an estimated APR.
This is why factor rates mislead. A 1.35 factor rate sounds like 35%, but you repay quickly, so you have the full amount for only a short time. Example: $100,000 funded at 1.35 over six months of daily payments is 126 payments of about $1,071. The estimated APR is roughly 126%. Add a 3% origination fee and it climbs further.
The calculator solves the IRR with Newton’s method and falls back to bisection, so it stays accurate even at very high rates. It is an estimate: real MCA holdbacks can flex with sales, and holidays shift the calendar.
How is factoring compared on equal terms?
The tool sizes a factoring facility to deliver the same net cash the MCA puts in your account. At an 85% advance, $97,000 of cash needs about $114,000 of invoices. It then applies the factoring fee each time those invoices turn over, for the full length of the MCA term.
That comparison is deliberately conservative toward the MCA. An MCA balance shrinks as you repay, while the factoring cost here assumes you keep the full amount funded the entire time. If factoring still wins under that assumption, it wins clearly.
Why does daily cash drain matter as much as the rate?
An MCA debits your operating account every business day or every week, whether customers paid you or not. That fixed drain competes with payroll, materials and taxes, and it is the main reason businesses end up stacking a second or third advance.
With factoring, your customers pay the factor directly when invoices come due. Nothing is pulled from your account on a schedule. Cash flow follows your sales cycle instead of fighting it. If you are already carrying advances, see how an MCA refinance with factoring works.
Who can actually use factoring instead of an MCA?
Factoring requires B2B or government receivables: invoices owed by creditworthy businesses or agencies on net terms. The funder underwrites your customers’ ability to pay more than your own credit score.
- Good fits: staffing, government contracting, manufacturing, distribution, construction subcontracting and business services.
- Not a fit: retail, restaurants or any business paid by consumers or card swipes. Those businesses do not have invoices to sell.
- Facilities generally start around $50,000. Read factoring vs. merchant cash advance for the full breakdown.
Questions people ask
Is a factor rate the same as an interest rate?
No. A factor rate is a multiplier on the amount funded, so 1.35 means you repay $1.35 for every $1. Because payback happens over a few months, the equivalent annual rate is usually several times higher than the factor rate suggests.
Why is the APR an estimate?
MCAs are structured as purchases of future receivables, not loans, so many carry no stated APR. This tool estimates one from the payment schedule you enter. Variable holdbacks, holidays and early-payoff discounts change the real figure.
Can factoring pay off my MCA?
Often, yes, if you have enough eligible B2B or government receivables. A funder may advance against your invoices and pay the MCA balance directly, ending the daily debits. Each case depends on the receivables, the MCA contract and any liens filed.
What factoring terms does the calculator assume?
It pre-fills 2.5% per 30 days, an 85% advance and 45 days to pay. These are illustrative middle-of-the-market inputs, not a quote. Change them to match a real proposal, or use the factoring cost calculator for tiered and prime-based pricing.
Does weekly payment change the APR much?
Somewhat. Weekly payments let you keep the money slightly longer between debits, which lowers the APR a little versus daily payments over the same term. The bigger drivers are the factor rate, the term length and upfront fees withheld.
What if I have more than one MCA?
Run each advance separately to see its cost, then add the daily debits together to see the total drain. Stacked advances are where factoring often helps most. You can get matched with funders that handle MCA consolidations backed by receivables.
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