The real math of a merchant cash advance

If you run an ecommerce business doing more than about $30K a month, you've already gotten the emails. Pre-approved for $180,000. Funds in 24 hours. No collateral. The product behind almost all of them is a merchant cash advance, and the single most important thing to understand about an MCA is that every number in the pitch is designed to prevent you from computing its actual cost.

Let's compute it anyway.

Factor rates are not interest rates

An MCA quotes a factor rate — say, 1.35 on a $100,000 advance. You repay $135,000. The pitch frames this as "35% cost," which already sounds steep but survivable for a big opportunity.

Here's what the factor rate hides: time. Interest rates are annual; a factor rate is total, regardless of how fast you repay. And MCAs are repaid fast — that's the mechanism. A typical structure debits a fixed percentage of your daily sales until the $135,000 is collected, usually over 6 to 9 months.

Repay $35,000 of cost over 7 months and your effective APR isn't 35%. It's roughly 90–110%, depending on the exact curve. Repay faster — which happens automatically if your sales grow, the very thing you borrowed to achieve — and the APR climbs higher. Growth is penalized. Read that again.

The daily debit is the trap, not the rate

The cost is bad; the structure is worse. Daily (sometimes weekly) fixed debits mean the MCA takes its cut before your rent, your payroll, your supplier deposit. On Amazon, where revenue arrives every two weeks but the debit hits every day, you are financing the MCA's repayment schedule with... more short-term borrowing.

This is where stacking begins. The first MCA squeezes cash flow, a second MCA "solves" the squeeze, and now two daily debits compete for the same revenue. Industry data on stacked merchants is grim, and the operators know it — which is why the renewal call comes before you're in trouble, not after.

"But I only need it for six weeks"

The one scenario where MCA math sort of works is an ultra-short bridge with a guaranteed exit. The problem: that's also the scenario where every honest alternative works better. A line of credit costs a fraction as much for a six-week draw. Even a revenue-based facility — repaid as a percentage of sales, but with transparent total cost and no daily debit — beats it without the spiral risk.

If the reason you're looking at an MCA is that nothing else will approve you, that's information. Either the timeline is too tight (fixable: start earlier next cycle), or the business can't currently support debt (fixable: but not by taking on the most expensive debt in commercial finance).

How to read any offer in 60 seconds

1. Total repayment ÷ amount received = your factor. $135K / $100K = 1.35.
2. Estimate the repayment window from the daily/weekly debit and your realistic sales.
3. Annualize: cost ÷ months × 12, divided by amount advanced, gets you close enough. 35% over 7 months ≈ 60% simple annual — and effective APR runs higher because your balance declines while payments don't.
4. If the seller of the product resists giving you the inputs for this math, that is the answer.

Where we stand

FundingForSellers doesn't broker MCAs. Not as a "last resort," not as a high-risk tier, not for a bigger referral fee — and referral fees on MCAs are the biggest in the industry, which tells you who the product really serves. Every structure we match — revenue-based financing, inventory financing, PO financing, lines of credit, term loans — has a knowable total cost and a repayment mechanic that doesn't fight your cash-flow cycle.

If you're staring at an MCA offer right now, run your situation through our matching first. Worst case, we confirm you have no better option this cycle and you've lost five minutes. Best case, we save you a year of daily debits.