A merchant cash advance usually costs more than a business loan for the same amount, because its fixed fee (the factor rate) is repaid in a few months. For example, $50,000 at a 1.30 factor rate over 8 months costs $15,000, an estimated 82% APR; a $50,000 loan at 14% over 24 months costs $7,615 in interest.
Enter your own offers below to compare total payback, total cost, payments per day, week and month, and the advance's estimated APR side by side. Everything runs in your browser; nothing is stored or sent.
| Merchant cash advance | Term loan | |
|---|---|---|
| Cash you receive | $50,000 | $50,000 |
| Total payback | $65,000 | $57,615 |
| Total cost | $15,000 | $7,615 |
| Payments | 168 × $386.90 daily | 24 × $2,400.64 monthly |
| Per business day | $386.90 | $114.32 |
| Per week | $1,934.52 | $553.99 |
| Per month | $8,125 | $2,401 |
| Term | 8 months | 24 months |
| APR | 82.1% (estimated) | 14.0% |
Verdict
The loan costs $7,385 less in total: $7,615 versus $15,000 for the advance.
Estimated APR: 82.1% for the advance vs 14.0% for the loan.
The advance takes about $8,125 a month out of your account, 3.4x the loan's $2,401. Check that your cash flow can carry it.
If you qualify for the loan and can wait for it, it is the cheaper option here. An advance mainly makes sense when the loan is not available or not fast enough.
Show the math
Advance payback = amount × factor rate = $50,000 × 1.3 = $65,000. Cost = payback − amount = $15,000.
Advance payments: 8 months × 252 business days ÷ 12 = 168 payments; $65,000 ÷ 168 = $386.90 per business day. Per month = daily × 21 (252 ÷ 12) = $8,125.
Advance estimated APR: the daily rate r at which the present value of all 168 payments equals the $50,000 you receive, found by trial (bisection), times 252 = 82.1%.
Loan payment = P × i ÷ (1 − (1 + i)−n), with P = $50,000, i = 14% ÷ 12, n = 24 = $2,400.64 a month. Interest = $2,400.64 × 24 − $50,000 = $7,615.
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Estimate only, not an offer. Actual terms depend on the lender and your file.
How the comparison works
- Advance payback = amount × factor rate. Cost = payback − amount. Payments are equal daily debits (252 business days a year) or weekly debits (52 a year) over the term you enter. If you enter the payment instead, the term is payback ÷ payment, with a smaller final payment when it does not divide evenly.
- Advance estimated APR: the daily or weekly rate at which the present value of the payments equals the cash you receive, found by bisection, times payments per year. It is the same method as the merchant cash advance cost calculator on our blog. It is an estimate: many advances collect a share of sales, so real payments and timing can differ.
- Loan payment uses the standard amortization formula, payment = P × i ÷ (1 − (1 + i)−n), with i = APR ÷ 12. Total cost = payments − amount, plus the origination fee if you enter one. The fee is treated as deducted from the proceeds, and the loan's APR is then recalculated on the cash you actually receive.
- Per day, week and month: daily debits × 5 = weekly and × 21 (252 ÷ 12) = monthly; weekly × 52 ÷ 12 = monthly; the loan's monthly payment × 12 ÷ 52 = weekly and × 12 ÷ 252 = per business day.
- Not included: early-payoff discounts, other fees (such as underwriting or ACH fees), and prepayment penalties. Ask each provider for every fee and add it to the cost.
How to read the result
Compare total cost to see how many dollars each option takes, and APR to see the price per year of having the money. A short advance can cost fewer total dollars than a long loan and still carry a far higher APR. Then check the per month line against your cash flow: an advance's daily or weekly debits often take several times more from your account each month than a loan payment.
Not sure which you can get? The business funding qualification checker shows which funding types are realistic for your revenue, time in business and credit.
Frequently asked questions
Is a merchant cash advance more expensive than a loan?
Usually, yes, when you compare like with like. In the example on this page, a $50,000 advance at a 1.30 factor rate costs $15,000 over about 8 months, an estimated 82% APR, while a $50,000 loan at 14% over 24 months costs $7,615 in interest. An advance can cost fewer total dollars than a long loan if it is repaid quickly, but its APR is still much higher.
How do you convert a factor rate to an APR?
Multiply the amount by the factor rate to get the payback, split it into the daily or weekly payments, then find the periodic rate at which those payments are worth the cash you receive. Multiply that rate by the number of payments per year (252 business days or 52 weeks). The calculator does this by trial and error, and labels the result an estimate because real MCA payments can change with your sales.
Why does the MCA's APR look so high when the factor rate is only 1.3?
A factor rate is charged once on the full amount, but you pay it back within months, so you only have the full amount for a short time. The shorter the term, the higher the APR for the same factor rate.
What does an origination fee do to a loan's cost?
Most online lenders deduct the fee from the money you receive, so you repay the full loan on a smaller amount of cash. The calculator adds the fee to the loan's total cost and shows an APR that includes it.
When does a merchant cash advance make sense over a loan?
When you do not qualify for a loan, or cannot wait for one, and the use of the money pays back more than the advance costs. If you qualify for both, the loan is usually the cheaper option. FSE's lending partners offer both, and FSE charges your business no fee.