For many small and medium sized businesses, a merchant cash advance is an easy way to secure cash quickly without too much paperwork, even when their credit history isn’t great. Not requiring a collateral, a cash advance allows merchants to pay back the borrowed sum daily from their credit card sales, until the whole sum has been repaid. A merchant cash advance calculator is a useful tool for determining the figures involved in a cash advance, and especially how much the borrower has to pay back.

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Easy Financing
A merchant cash advance can be appealing for businesses that receive most of their revenues through credit card payments or don’t want or don’t qualify for financing from a bank. Also, it can be a solution for businesses with a poor credit rating. Although merchant cash advance fees can be quite high, its availability makes it a reliable short-term financing option for increasing the inventory, improving the cash flow, taking care of pressing debts or expenses that arise unexpectedly.

The True Interest Rate

When it comes to a merchant cash advance calculator, it’s important to make the distinction between the standard interest rate used for calculating the monthly payment, and the Annual Percentage rate or APR, which is the true interest rate to be paid. When there are no other fees associated with the cash advance, a standard loan calculator that takes into account the standard interest rate together with the amount borrowed and the repayment term for determining the sum that has to be paid is sufficient.

Quite often, however, lenders have an origination fee charged up front as a percentage of the borrowed sum, as well as smaller monthly loan servicing fees. When these are taken into account, the figures can change quite significantly, hence the importance of the true interest rate, the APR, which is calculated after deducting fees from the borrowed sum and the monthly payments.

An Example

If a small clothing store takes a merchant cash advance of $10,000 with a 12-month term, a 10% interest rate, and an originating fee of 5% of the borrowed sum, the fee has to be deducted from the total sum, $10,000 – $500 = $9,500, which will be the actual value of the loan. Then, if a $10 monthly loan servicing fee is also included, this will have to be added to the monthly payment $879,16 + $10 = $889,16. The daily payment sum for this rate would be around $30. In this case, the APR will be 22.01%, much bigger than the actual interest rate.

Note that many funding providers use factor rates ranging from 1.14 to 1.48 to calculate how much the borrower has to pay back: $10,000 x 1.14 = $11,400 or $100,000 x 1.48 = 148,000.


Cash advances are always a financing option for small and medium sized businesses. When fees are involved, however, it’s not enough to use just the interest rate to calculate monthly payments accurately. Businesses who take cash advances should use a merchant cash advance calculator to determine the true interest rate they will be paying and find out exactly how much they have to pay monthly and daily.