Glossary · Pricing and math
Effective APR (estimate)
An effective APR estimate annualizes an MCA's cost from its payment schedule so it can be compared with loans. It is an estimate, not a disclosure figure.
Also called factor rate to APR, MCA APR, estimated APR, annualized cost
A factor rate hides how fast the money is repaid. The effective APR treats the advance like a loan: it finds the annual rate at which the scheduled payments are worth exactly the cash received, the same internal rate of return method used for loans.
Short terms make the APR very high even at modest factors. A 1.35 factor repaid over about six months annualizes to well over 100%.
Estimate only
This is an estimate. True MCAs have no fixed term, so the result depends on assumed payments. California and New York require providers to disclose an estimated APR on covered transactions using methods set in their regulations, and those figures can differ. Brokers should pass on the provider's disclosure, not their own number. See disclosure laws. Not legal advice.
Formula
find r so that: net funding = Σ payment ÷ (1 + r ÷ m)^k for k = 1 … n m = payments per year (about 252 for daily at 21 a month, 52 for weekly)
Example
$48,000 net, 126 daily payments of $535.71, 252 payments a year: roughly 144% a year. Measured on the $50,000 gross advance instead of net, about 126%.
Track it on every deal
Statements, offers, positions and commissions with the math worked out, in one CRM for lending companies.
Related
- Free toolMCA factor rate calculatorFree merchant cash advance calculator. Enter the advance, factor rate, fee and term to get payback, daily or weekly payment, cost of capital and an APR estimate.Read
- Free toolBusiness loan payment calculatorCalculate the monthly payment, total interest and total cost of an amortizing business term loan from the amount, interest rate and term. Free and instant.Read
- GuideState commercial financing disclosure laws, as of October 2026Which states require commercial financing and MCA disclosures as of October 2026, what Texas HB 700 means for brokers, and what a broker's CRM should record.Read
- GlossaryFactor rateThe multiplier that sets what a merchant repays on a cash advance: advance amount times factor rate equals the total payback, usually 1.10 to 1.55.Read
- GlossaryNet fundingNet funding is the cash a merchant actually receives: the advance minus origination and other fees and minus any payoffs of existing advances.Read
- GlossaryOrigination feeAn origination fee is a charge the funder deducts from the advance at funding, usually a percent of the advance (often 2 to 5%) or a flat amount.Read
- GlossaryRTR (right to receive)RTR is the total amount of future receivables a funder buys in a merchant cash advance: the advance times the factor rate, also called the payback.Read