Why it matters
Offers arrive as a few numbers in an email. The merchant cares about cash in hand and the payment; you care about affordability and commission. The calculator works all of it out the same way every time, and the server recalculates and stores every figure, so what you compare is what you saved.
Enter an offer
- 1On the deal's Lenders tab, open the submission's menu and click Add offer, or click Add offer on the Offers card.
- 2In Add offer, pick the Lender, then enter Advance amount, Factor (sell rate), Origination fee (%), and any Other fees and Payoffs.
- 3Pick Payment frequency and enter the Term in months, or switch to Payments and enter the number of payments.
- 4If you can see commissions, enter Buy rate, Base commission (the lender default is pre-filled) and Commission on.
- 5Read the panel on the right: payback, net to merchant, payment, affordability and your commission. Save.
The formulas
payback (RTR) = advance x factor origination fee = advance x fee % net to merchant = advance - fee - other fees - payoffs cost of capital = payback - net effective factor = payback / net payments per month = daily: business days (21 by default), weekly: 52/12, biweekly: 26/12, monthly: 1 number of payments = round(term months x payments per month), unless entered payment = payback / number of payments (to the cent; the last payment absorbs the rounding) holdback % = payment x payments per month / monthly revenue x 100 combined holdback % = (existing monthly payments + payment x payments per month) / revenue x 100 upsell points = (sell factor - buy factor) x 100 commission % = base % + upsell points commission $ = basis x commission % (basis: advance, net funding or payback)
- RTR (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.
- Net fundingNet funding is the cash a merchant actually receives: the advance minus origination and other fees and minus any payoffs of existing advances.
- Buy rateThe buy rate is the lowest factor a funder will accept on a deal from an ISO. The ISO can sell above it, and the gap becomes upsell commission.
- Sell rateThe sell rate is the factor rate the merchant actually signs, set by the ISO at or above the funder's buy rate. It decides the payback and the ISO's upsell.
- PointsPoints are ISO commission expressed as a percent of the funded amount: base points paid by the funder plus upsell points from selling above the buy rate.
Worked example
A landscaping company averages $72,000 a month in true revenue and already pays one advance at $220 a day ($220 x 21 = $4,620 a month). A lender offers $40,000 at a 1.32 factor with a 3% origination fee, daily payments over 7 months. Your buy rate is 1.27 and the lender pays a 4% base commission on the advance.
| Step | Arithmetic | Result |
|---|---|---|
| Payback | 40,000 x 1.32 | $52,800.00 |
| Origination fee | 40,000 x 3% | $1,200.00 |
| Net to merchant | 40,000 - 1,200 | $38,800.00 |
| Cost of capital | 52,800 - 38,800 | $14,000.00 |
| Effective factor | 52,800 / 38,800 | 1.3608 |
| Number of payments | 7 x 21 | 147 |
| Payment | 52,800 / 147 | $359.18 a day (last payment $359.72) |
| Monthly payment | 359.18 x 21 | $7,542.78 |
| Holdback (this offer) | 7,542.78 / 72,000 | 10.48% |
| Combined with existing | (7,542.78 + 4,620) / 72,000 | 16.89% |
| Upsell points | (1.32 - 1.27) x 100 | 5 |
| Commission % | 4 + 5 | 9% |
| Commission $ | 40,000 x 9% | $3,600.00 |
The last payment absorbs the rounding: 146 payments of $359.18 come to $52,440.28, so the 147th is $52,800 - 52,440.28 = $359.72.
With the default thresholds (amber at 15%, red above 25%) the affordability badge reads Tight: this offer alone is fine, but together with the existing advance the merchant would hand over almost 17% of revenue. Switch Payment frequency to Weekly and the same offer becomes 30 payments of $1,760.00, about $7,626.67 a month, so the combined holdback is about 17.0%. Weekly feels lighter to the merchant but costs a little more per month, because 52/12 weeks is more than four.
Change Commission on and the commission changes too: 9% of net funding ($38,800) is $3,492.00, and 9% of payback ($52,800) is $4,752.00. Use whatever basis your ISO agreement with that lender states.
Common mistakes
- No revenue on the deal. Without a statement analysis or stated revenue, the affordability box asks you to add one and shows no holdback.
- Entering payoffs on a consolidation but leaving the paid-off positions active. The net is right, but the combined holdback counts payments that will stop.
- Typing the factor as a percent. The factor is a multiplier: 1.32, not 32.
- Showing the merchant the commission panel. It is marked Internal for a reason; present payback, net, payment and term.
Only users with commission access see Buy rate, Base commission and Your commission. Processors and anyone else without it see the merchant-side numbers only.
Questions
Why does the effective factor differ from the factor rate?
The factor rate is applied to the full advance, but fees and payoffs come out before the merchant receives cash. The effective factor divides the payback by the net funding, so it shows what the merchant pays back for each dollar actually received. In the example, a 1.32 factor with a 3% fee is an effective 1.3608.
How is the number of payments worked out from a term in months?
The term in months is multiplied by payments per month and rounded: 21 business days a month for daily payments (or the lender's own setting), 52/12 for weekly, 26/12 for biweekly and 1 for monthly. A 7 month daily term is 7 x 21 = 147 payments. You can also enter the number of payments directly.
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Related lessons
- Merchant cash advance 101Factor rates and payback math, worked throughHow factor rate, payback, payment, holdback and estimated term fit together, with worked examples, and why an APR-style estimate is tricky but often required.
- Merchant cash advance 101Fees, points, buy rate and sell rateOrigination fees, net funding, broker points, buy rate versus sell rate and upsell, with a worked example of the commission and the full cost to the merchant.
- Sales rep playbookRecording and comparing offersEnter each lender's offer once, let the calculator work out payback, payment, net funding and holdback, compare them side by side and accept one.
- Underwriting and analysisStacking and payment burdenMeasure how much of a merchant's revenue already goes to advances, set your affordability lines in settings, and read the warnings the CRM raises.
- Help centerRecord and compare offersEnter a lender's offer for any product and let the calculator work out the payment, net to merchant, total cost, an APR estimate and your commission, then compare offers side by side, even across products.