The MCA Calculator is an online tool that helps business owners better understand the cost of merchant cash advances. It provides a transparent way to assess an MCA’s impact on cash flow, weigh the benefits against costs, and compare offers from different lenders. This can help ensure that a company chooses the best financing option for its short-term business needs.
The calculator is easy to use and only requires a few inputs. Input the advance amount, factor rate, holdback percentage, and estimated sales volume into the calculator. You can then select the daily payment, total payback amount, or approximate days to repay to see the results.
A merchant cash advance (MCA) is a non-loan form of short-term financing that allows businesses to borrow against their future credit and debit card receipts. It differs from traditional forms of financing, such as a loan or lines of credit, in several ways. One important difference is that MCAs do not have set interest rates or repayment term lengths, as they are based on the amount of credit and debit card sales a business receives each month.
When using the MCA Calculator, it is important to keep in mind that MCA fees are calculated as a multiple of the advance amount. This means that the higher the advance amount, the greater the fee will be. For this reason, it is often beneficial to only consider MCAs from lenders that offer a low factor rate.
To determine the MCA’s true cost, it is also important to take into account any additional fees or charges that may be associated with the transaction. For example, some lenders may charge application fees, underwriting fees, or other one-time expenses. These can significantly increase the overall cost of an MCA, so it is important to carefully consider all aspects of an MCA’s financing structure before deciding whether or not to proceed with the funding.
Once all of the relevant information has been entered into the calculator, the tool will display the total financing costs, the estimated daily payment, and the number of days until the MCA is paid in full. It is important to note that these numbers will fluctuate with the company’s actual credit and debit card sales, so they should be considered estimates. Additionally, the MCA Calculator will also calculate the effective interest rate on the advance by dividing the total MCA fees by the advance amount and multiplying by 365 to annualize the result. The MCA Calculator is a valuable tool that can help business owners and financial professionals better understand the costs of merchant cash advances. By using this tool, they can make more informed decisions that align with their business’s financial goals and avoid costly mistakes.