by Wilson Galyean, Senior Marketing Analyst
The actual costs of Merchant Cash Advance (MCA) and Daily Debit loans are intentionally hidden by lenders, so it’s about time to level the playing field a bit. We developed the chart below to show you, up-front, what the confusing language of MCA term sheets really means.
MCA Chart

Merchant Cash / Daily Debit lenders use two factors to hide the equivalent APR of their loans:

Buy Rate – the multiple the lender places on your loan to determine how much you owe. For example, a 1.3 buy rate on a $100,000 loan means you would owe $130,000.

Term – the time over which you will repay the loan.

The relationship between Buy Rate and Term is how we find the equivalent APR for an MCA loan. This table shows how changes in each factor impact the equivalent APR. One interesting fact to note is that with an MCA loan, the amount you’re borrowing doesn’t matter – if the buy rate and term are equal between two MCA loans, the equivalent APR will be the same whether you’re borrowing $10,000 or $100,000.

Keep in mind that a standard buy rate for an MCA loan is anywhere from 1.3 to 1.4, and that the absolute lowest we have ever seen is 1.2. Terms are often at 6-12 months, so that means equivalent APRs for MCAs are often between 60% – 150%.

If your business needs money quickly (within a day or two), then borrowing from an MCA might be an understandable option, but before signing the papers, you deserve to know the true costs you’re paying. That’s just common decency.

If you have questions about your options, or would like us to help you understand your rates, let me know!