Orchardpeak Business Funding, a small-business funding service in Stillwater, OK, offers this factor rate calculator for merchant cash advance offers, which are not loans. It turns an advance, a factor rate and a holdback into total payback, dollar cost and estimated days of collection, and explains how to compare that cost with a loan.
The four numbers the calculator returns
- Total payback: the advance multiplied by the factor rate
- Cost: total payback minus the advance
- Daily collection: your average daily card sales times the holdback percentage
- Estimated days: total payback divided by daily collection
It does not know your offer's fees, whether collection is a true holdback or a fixed debit, or how your sales will change. Treat the result as an estimate.
Illustrative example
Illustrative arithmetic only, not an offer: a $15,000 advance at a 1.30 factor means $19,500 total payback and $4,500 in cost. With $1,200 in average daily card sales and a 10% holdback, collection is about $120 a day, so collection takes about 163 business days. If sales fall to $900 a day under a true holdback, collection falls to $90 and stretches to roughly 217 days; under a fixed daily debit, the $120 keeps coming out regardless.
Factor rate to APR: why the comparison is tricky
A factor rate is not an interest rate, and an advance has no amortization schedule, so there is no exact conversion. You can get a rough sense, though. In the example above, $4,500 of cost on $15,000 is 30 percent of the advance, collected over about 163 business days, which is well under a year. Spread over a year, that cost works out to a much higher annual figure, and because the unpaid balance falls every day, the effective annual cost is higher again.
The practical comparison is simpler: for the same amount and roughly the same timeframe, ask what a working capital loan or a line of credit would cost in dollars, and set that next to the advance's cost.
A calculator for advances, not loans
No. A factor rate loan calculator or an amortization factor rate calculator would treat the offer as a loan, and an advance is not one. This tool prices the advance; the merchant cash advance page explains how advances work, and our article on how merchant cash advances work goes through holdbacks and stacking.
What providers may review before an advance
Card and bank deposit volume, how steady it is, and any advances already being collected. For a restaurant or other card-heavy business, the restaurant page covers the alternatives. More guides sit on the Orchardpeak resources page.
By Orchardpeak Business Funding · Updated