Enter the loan amount in your currency.
Enter the interest rate as a percentage.
Enter the loan term in days.
Enter your daily sales in your currency.
Enter the hold percentage as a percentage.
History:

Explanation

What is a Merchant Cash Advance?

A Merchant Cash Advance (MCA) is a type of financing where a lender provides a lump sum of cash to a business in exchange for a percentage of future credit card sales or daily bank deposits. This type of financing is often used by businesses that need quick access to capital but may not qualify for traditional loans.

How to Calculate the Cost per Merchant Cash Advance?

To determine the cost associated with a Merchant Cash Advance, you can use the following formulas:

  1. Total Repayment Amount (TR):

    §§ TR = L + (L \times \frac{R}{100}) §§

    where:

    • § TR § — Total Repayment Amount
    • § L § — Loan Amount
    • § R § — Interest Rate (as a percentage)

  2. Hold Amount (HA):

    §§ HA = TR \times \frac{H}{100} §§

    where:

    • § HA § — Hold Amount
    • § H § — Hold Percentage (as a percentage)

  3. Daily Repayment Amount (DRA):

    §§ DRA = \frac{HA}{T} §§

    where:

    • § DRA § — Daily Repayment Amount
    • § T § — Loan Term (in days)

Example Calculation

Let’s say you have the following values:

  • Loan Amount (L): $10,000
  • Interest Rate (R): 5%
  • Loan Term (T): 30 days
  • Daily Sales: $500 (not directly used in the calculation)
  • Hold Percentage (H): 10%

Step 1: Calculate Total Repayment Amount (TR)

§§ TR = 10000 + (10000 \times \frac{5}{100}) = 10000 + 500 = 10500 §§

Step 2: Calculate Hold Amount (HA)

§§ HA = 10500 \times \frac{10}{100} = 1050 §§

Step 3: Calculate Daily Repayment Amount (DRA)

§§ DRA = \frac{1050}{30} = 35 §§

When to Use the Cost per Merchant Cash Advance Calculator?

  1. Financial Planning: Understand the total cost of borrowing through a Merchant Cash Advance.

    • Example: A business owner can assess how much they will need to repay daily.

  2. Cash Flow Management: Evaluate how a cash advance will impact daily cash flow.

    • Example: Determine if the daily repayment fits within the business’s revenue.

  3. Comparative Analysis: Compare the costs of different financing options.

    • Example: Assessing whether an MCA is more cost-effective than a traditional loan.

  4. Budgeting: Plan for future expenses based on repayment amounts.

    • Example: Adjusting monthly budgets to accommodate daily repayments.

Definitions of Key Terms

  • Loan Amount (L): The total amount of money borrowed from the lender.
  • Interest Rate (R): The percentage charged on the loan amount, typically expressed annually.
  • Loan Term (T): The duration over which the loan must be repaid, usually measured in days.
  • Daily Sales: The average amount of money a business earns in sales each day, which can help assess repayment feasibility.
  • Hold Percentage (H): The percentage of daily sales that will be withheld by the lender to repay the advance.

Practical Examples

  • Retail Business: A retailer may use this calculator to understand the cost of a cash advance needed to purchase inventory.
  • Restaurant: A restaurant owner can calculate how much they will need to set aside daily from their sales to repay the advance.
  • Service Provider: A service-based business can evaluate the impact of a cash advance on their cash flow and daily operations.

Use the calculator above to input different values and see the cost per Merchant Cash Advance change dynamically. The results will help you make informed financial decisions based on your business needs.