Merchant Cash Advance Calculator

Imagine you're opening a lemonade stand, but you need $10 to buy lemons, sugar, and cups. You could ask your parents for a loan, but they might take a long time to decide. That's where a Merchant Cash Advance (MCA) comes in handy!

An MCA is like a friend who gives you money right away to start your lemonade stand. This friend believes in you and knows you'll sell lots of lemonade.

Let's say you usually make about $10 each day selling lemonade. Your friend might say, "Okay, I can give you $9 to get started. But to help you pay me back easily, each day, you'll give me $1 from your lemonade sales." That $1 is called a "holdback." It's like a little bit of your lemonade money goes straight to your friend each day.

So, you get $9 to start (because your friend is holding back $1 of the $10 you need), and each day you give your friend $1 from your sales. This way, you can start selling lemonade right away without waiting for your parents to decide.

But here's a bit more about how it works. Your friend might also ask for a small extra amount each day, like 50 cents, from your piggy bank. This extra amount is called a "daily ACH." ACH is just a fancy way to say that money is automatically taken from your piggy bank each day.

So, if you make $10 each day in sales, here's what happens:

Your friend takes $1 as a holdback.
Your friend also takes 50 cents as a daily ACH from your piggy bank.

So, the money you get to keep each day for more lemons and cups is:

$10 (sales) - $1 (holdback) - $0.50 (daily ACH) = $8.50

This means you get to keep $8.50 each day to buy more lemons and sugar, and your friend gets $1.50 each day to help pay back the loan.

Why do you pay back more than $10? Well, because your friend helped you out so quickly, they ask for a little extra to cover the cost of giving you the money right away. This extra amount is like a small fee for the convenience of starting your lemonade stand immediately. In the end, you'll pay back about $12.

Important things to remember:

MCAs are like getting money from a friend who believes in your business.
You pay them back with a portion of your sales each day (that's the holdback).
You also make small payments from your piggy bank each day (that's the daily ACH).
It might cost a little more overall, but you get the money much faster!
Always ask a grown-up to help you understand the details before making a deal.

This way, you can make the best decision for your lemonade stand and become the best lemonade seller in the neighborhood!

Total Monthly Sales (All Sources):

Average Daily Credit Card Sales: Cash Mostly Business? (Learn more)

Requested Advance Amount:

Factor Rate (National Avg 1.35):

Holdback Percentage: Don't Know What to Put? (Watch video)

Repayment Period (Months):

This calculator provides estimates for informational purposes only. Actual MCA terms and qualifications may vary based on a variety of factors, including your creditworthiness, business history, and industry. It is recommended to consult with a qualified financial professional and MCA provider to discuss your specific needs and obtain personalized quotes.

Results

Pre-Qualification Estimate:

Total Monthly Sales: $

Estimated Qualification Range: $ - $

MCA Calculation:

Requested Advance: $

Factor Rate:

Total Cost of MCA: $

Total Fees: $

Daily Credit Card Sales: $

Holdback Percentage: %

Daily Holdback: $

Repayment Period: Months ( days)

Total Holdback: $

Remaining Repayment: $

Daily Bank Withdrawal (ACH): $

Net Funding: $

Here's how the numbers break down for your scenario:

Requested Advance: $

This is the amount of funding you've requested for your business.

Factor Rate:

The factor rate is how we calculate the total cost of the MCA. In your case, a factor rate of means that for every $1 you receive, you'll ultimately pay back $.

Total Cost of MCA: $

This is the total cost of the MCA, including the advance amount and all fees.

Average Daily Credit Card Sales: $

This is your average daily credit card sales volume, which is crucial for determining the repayment schedule.

Holdback Percentage: %

The holdback is a small percentage of your daily credit card sales that is automatically withheld each day as a partial repayment. This helps reduce the amount of your daily bank withdrawals.

Daily Holdback Amount: $

$ will be withheld from your daily credit card sales.

Repayment Period: Months ( days)

This is the estimated timeframe for completing your repayment.

Total Holdback Amount (Over Repayment Period): $

This is the total amount that will be collected through the daily holdback over the -day repayment period.

Remaining Repayment Amount (After Holdback): $

This is the remaining balance to be repaid after the total holdback amount is accounted for.

Daily Bank Withdrawal (ACH): $

To complete the repayment, daily automated withdrawals (ACH) of $ will be made from your business bank account for days.

Net Funding Amount: $

This is the actual amount of cash you will receive upfront after the total holdback is accounted for.

Understanding Merchant Cash Advances (MCAs), Holdbacks, and Net Funding

A Merchant Cash Advance (MCA) provides quick access to capital for your business, but it works differently than a traditional loan. Instead of a fixed interest rate and monthly payments, an MCA involves selling a portion of your future credit card sales in exchange for an upfront lump sum. This means repayments are directly tied to your sales volume – higher sales mean faster repayment, and vice versa.

Key Advantages of MCAs:

Fast Access to Capital: MCAs are known for their speed. You can often receive funding within a few days, making them ideal for time-sensitive opportunities or emergencies.
Flexible Repayment: Repayments fluctuate with your credit card sales. This means you won't be burdened with fixed monthly payments, which can be helpful during slower sales periods. If you have a busy period, you'll repay faster.
Less Stringent Requirements: MCA providers typically focus more on your daily credit card sales volume than on your credit score, making them accessible to businesses that may not qualify for traditional bank loans.

Key Considerations of MCAs:

Higher Cost Compared to Some Loans: MCAs use a "factor rate" instead of an interest rate. This factor rate is a multiplier applied to the advance amount to determine the total repayment. While it's not directly comparable to an APR, factor rates are generally higher than traditional loan interest rates. So, while you get the money quickly and flexibly, it comes at a higher overall cost.
Impact on Daily Cash Flow: Because repayments are taken directly from your daily credit card sales, an MCA will impact your immediate cash flow. This is where the "holdback" comes in.

Understanding the Holdback:

The holdback is a percentage of your daily credit card sales that is automatically withheld by the MCA provider as partial repayment. This means you won't receive the full amount of your credit card transactions each day; a portion will be sent directly to the MCA provider.

How the Holdback Works and Why It Matters:

Lower Daily Bank Withdrawals: The primary benefit of a holdback is that it reduces the amount of daily bank withdrawals (ACH). Instead of one large daily withdrawal, a portion of the repayment is taken directly from your credit card sales, resulting in smaller, more manageable ACH withdrawals from your bank account.
Impact on Net Funding: A higher holdback percentage means less cash in your hand upfront (lower net funding). This is the trade-off. You receive less money initially, but your daily impact on your bank account is reduced.
Finding the Right Balance: The holdback percentage is a crucial factor to consider. A lower holdback means more upfront cash but larger daily ACH withdrawals. A higher holdback means less upfront cash but smaller, more manageable daily ACH withdrawals.

Example: Let's say you have $200 in daily credit card sales and a 7% holdback. This means $14 ($200 * 0.07) is withheld daily. If you had a 10% holdback, $20 would be withheld daily. You'd receive less upfront, but your daily bank withdrawals would be smaller.

Net Funding:

The net funding amount is the actual amount of cash you receive upfront after all upfront fees are deducted. This is a crucial number because it represents the real amount of working capital you have access to immediately. These upfront fees can include:

Origination Fees: A one-time percentage-based fee for setting up the MCA.
Underwriting/Processing Fees: Fees for evaluating your application and assessing risk.
Closing Costs: Any other fees associated with finalizing the agreement.

Therefore, the net funding is calculated as:

Requested Advance - (Origination Fees + Underwriting Fees + Closing Costs) = Net Funding

It's important to understand that the net funding will always be less than your requested advance due to these upfront deductions.

Businesses without Credit Card Sales: While Merchant Cash Advances are traditionally tied to credit card sales, some alternative financing options exist for businesses that primarily operate with cash or other payment methods (e.g., construction companies, certain service businesses). However, these types of financing often have stricter eligibility requirements. Industry standards for these types of financing may include:

Strong Bank Statements: Demonstrating consistent and healthy cash flow through bank statements is crucial. Lenders will look for consistent revenue, positive balances, and minimal overdrafts.
Time in Business: Lenders often require a longer operating history for businesses without credit card sales, typically two years or more.
Personal Credit Score: The owner's personal credit score may be given more weight in the absence of credit card sales data.
Collateral: Some lenders may require collateral (e.g., equipment, real estate) to secure the financing.
Proof of Contracts or Invoices: For businesses that invoice clients, providing proof of existing contracts or outstanding invoices can help demonstrate future revenue streams.

If your business does not process credit cards and you're interested in financing, it's essential to consult with a financial specialist who can guide you through the available options and requirements.

Why Should You Play With the Calculator?

We encourage you to experiment with the calculator's inputs, especially the holdback percentage and repayment period. By adjusting these values, you can see how they affect:

Net Funding: How much cash you receive upfront.
Daily Holdback Amount: The amount withheld from your daily credit card sales.
Daily ACH Withdrawal: The amount withdrawn from your business bank account.
Total Repayment Amount: The total cost of the MCA.

Finding the right balance between these factors is crucial for making an informed decision. By understanding these trade-offs, you can find an MCA structure that best fits your business's cash flow needs.

Additional Fees and Potential Waivers

While the factor rate and holdback are the primary costs associated with a Merchant Cash Advance (MCA), there are some potential additional fees to be aware of:

Origination Fees: A one-time fee for processing and setting up the advance.
Underwriting/Processing Fees: Fees for reviewing your application and assessing risk.
Closing Costs: One-time fees associated with finalizing the agreement.
Administrative/Service Fees: Ongoing fees for account maintenance.
Bank Processing Fees: Fees charged by your bank for ACH debits.
Early Payoff Penalties: Potential penalties for paying off the advance early (not always applicable).

At 3B Advance, we understand that every business is unique. We often waive some of these fees on a case-by-case basis to provide the most competitive and beneficial MCA solutions for our clients.

To learn more about potential fee waivers and how we can tailor an MCA to your specific needs, we encourage you to reach out to one of our experienced specialists. They can provide personalized guidance and answer any questions you may have.

Contact a Specialist