If you've ever had two merchant cash advance offers on your desk, you've felt the problem: the paperwork looks different, the salespeople sound different, and the numbers don't line up in any obvious way. Offer A quotes a 1.32 factor rate. Offer B quotes 1.40 but no origination fee and a longer term. Which one is cheaper? Most borrowers guess — and guessing with five-figure funding decisions is expensive.
Why MCA offers are so hard to compare
Unlike a mortgage or a term loan, there is no standardized disclosure format for merchant cash advances. Lenders quote different combinations of factor rates, origination fees, terms expressed in months or "business days," and repayment via daily ACH or a percentage holdback on card sales. Two offers with the same funded amount can differ by thousands of dollars in total cost and feel completely different on your cash flow. Standardizing the comparison yourself is the only reliable defense.
The 7 numbers that matter
Get each of these in writing for every offer you're considering. If a lender won't put a number in writing, treat that as information.
1. Funded amount — what actually hits your account
The headline number is the gross advance, but what matters is the net amount you receive after fees are deducted. A $50,000 advance with a 3% origination fee puts $48,500 in your account — but you still repay based on the full $50,000. Always ask: "What is the exact deposit amount?"
2. Factor rate — the cost multiplier
The factor rate is multiplied by the funded amount to get your total repayment — it is not an interest rate. Typical MCA factor rates run from about 1.15 to 1.55 depending on your credit, revenue, and time in business. For a full explanation with conversion examples, see our guide on what a factor rate is and why it's different from APR.
3. Total payback — funded amount × factor rate, plus fees
This is the single most important number: the total dollars leaving your business. A $50,000 advance at a 1.35 factor rate means $67,500 in total payback — the $17,500 difference is the cost of capital. Compare this number across offers first; everything else is detail.
4. Term length — and the APR-equivalent it implies
Factor rates ignore time, which is why two offers with similar factor rates can have wildly different true costs. Normalize with an approximate APR: ((Factor rate − 1) × 365 / term in days) × 100. A 1.40 factor over 10 months is far cheaper in APR terms than a 1.32 factor over 6 months, as the worked example below shows.
5. Fees — origination, NSF, and lockbox charges
Origination or processing fees (typically 2–5%) are usually deducted from your funding, not added to the payback — which quietly raises your effective cost. Also ask about insufficient-funds fees, wire fees, and whether a lockbox or new bank account is required. Fees are where "cheap-looking" offers hide their margin.
6. Payment structure — daily ACH vs. percentage holdback
Most MCAs collect via fixed daily (or weekly) ACH withdrawals; some use a percentage holdback on credit card sales. Fixed daily payments are predictable but unforgiving in a slow week; a holdback flexes with your revenue. Two offers with identical total payback can feel very different on cash flow — divide the total payback by the number of payment days to get your real daily number.
7. The fine print — renewals, stacking, early payoff, and security
Ask four questions before signing: (1) Is there an early-payoff discount, or do you owe the full payback regardless? (most MCAs: full payback). (2) Can you renew or stack another advance during the term, or is it prohibited? (3) Does the agreement include a confession of judgment clause? (4) Is there a UCC lien filed on your business assets? The answers don't make an offer good or bad — but you should never discover them after signing.
Worked example: Offer A vs. Offer B
Same $50,000 funding need, two different offers. (Illustrative numbers — your quotes will differ.)
| Offer A | Offer B | |
|---|---|---|
| Funded amount | $50,000 | $50,000 |
| Factor rate | 1.32 | 1.40 |
| Total payback | $66,000 | $70,000 |
| Origination fee | 3% ($1,500, deducted) | None |
| Net amount received | $48,500 | $50,000 |
| Term | 6 months (~120 business days) | 10 months (~200 business days) |
| Daily payment | ≈ $550/day | ≈ $350/day |
| Approximate APR-equivalent | ≈ 65% | ≈ 49% |
Offer A looks cheaper — lower factor rate, lower total payback. But Offer B's longer term makes it cheaper in APR-equivalent terms, puts $1,500 more in your account, and costs $200 less per day in cash flow. Depending on your priorities, Offer B is arguably the better deal — and you'd never know that from the factor rates alone. This is why the 7-number checklist beats the headline number every time.
Red flags that should make you pause
- No written offer. Verbal quotes that "we'll finalize after you sign the application" are a hard no.
- Factor rate quoted without a term. A factor rate with no stated term length can't be converted to an APR-equivalent — that's the point of quoting it that way.
- Pressure to sign today. Legitimate funding doesn't expire at midnight. High-pressure tactics correlate with bad terms.
- Fees disclosed only at closing. If origination or other fees appear for the first time in the final documents, walk away and re-quote elsewhere.
- One offer, no alternatives presented. A broker who shows you a single option isn't shopping your deal. Ask what else your file qualified for.
Frequently asked questions
Is the lowest factor rate always the cheapest offer?
No. Factor rate ignores term length and fees. A 1.32 factor over 6 months with a 3% origination fee can cost more — in APR-equivalent terms and in daily cash flow — than a 1.40 factor over 10 months with no fees. Always normalize to total payback and APR-equivalent.
What's a good factor rate in 2026?
It depends on your profile: roughly 1.15–1.25 for strong borrowers (650+ credit, 2+ years, $50K+/month revenue), 1.25–1.40 for typical MCA borrowers, and 1.40–1.55 for challenged credit or restricted industries. See our factor rate guide for the full breakdown.
Should I use an MCA calculator before applying?
Yes for estimating total payback — but calculators only answer the question you ask them. Plug in the net funded amount and the actual term, not the headline numbers, and sanity-check the result against the APR-equivalent formula above.
Can I negotiate MCA terms?
Often, yes — especially on larger deals or with competing written offers. The most effective leverage is a second quote: lenders and brokers routinely tighten factor rates to win a deal they know is being shopped.
Daily ACH or percentage holdback — which is better?
Daily ACH is predictable and works well for steady-revenue businesses. A percentage holdback flexes with your sales, which helps seasonal businesses but makes total payback timing less certain. Neither is universally better — match the structure to your revenue pattern.
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