This estimator takes four inputs from a merchant cash advance offer, the advance amount, factor, holdback percentage and average daily card sales, and returns the total payback, the cost of the advance and an estimated number of sales days to finish remitting. A merchant cash advance is not a loan. Truevale Loans, a small-business funding broker in Reading, Pennsylvania, provides it as illustrative arithmetic only.
The four inputs
- Advance amount: the sum the funder pays you, before any fees it deducts.
- Factor: the multiplier stated in the offer. Advance times factor equals the total to be remitted.
- Holdback: the percentage of each day's card sales the funder collects.
- Average daily card sales: your own figure, taken from recent processing statements.
The three results
- Total payback: advance multiplied by factor.
- Cost of the advance: total payback minus the advance.
- Estimated days: total payback divided by the daily collection (daily sales times holdback), counted in sales days.
A merchant cash advance example, worked by hand
Hypothetical only, with round numbers chosen for easy arithmetic, not to resemble any offer: a $10,000 advance, a factor of 2.0, a 10 percent holdback and $1,000 of average daily card sales.
- Total payback: $10,000 times 2.0 is $20,000.
- Cost of the advance: $20,000 minus $10,000 is $10,000.
- Daily collection: 10 percent of $1,000 is $100.
- Estimated days: $20,000 divided by $100 is 200 sales days.
Halve the daily sales to $500 and the daily collection falls to $50, so the estimate doubles to 400 sales days. The total payback does not change; only the time does.
Steps the estimator does not do for you
It counts sales days, not calendar days. To turn the estimate into calendar time, divide by the number of days a week the business takes card sales: a business open six days a week finishes 200 sales days in roughly 33 weeks. It assumes your average daily sales stay constant and that every sales day is collected. Fixed daily or weekly debits, fees deducted from the advance, days with no sales and a second advance on top are not modeled; work those out separately with the agreement in front of you.
Interpreting the result
The estimated days figure is the one owners most often underestimate. A short collection period means larger daily withdrawals relative to sales; a long one means the holdback sits on every sale for many months. Before accepting, compare the cost of the advance in dollars with what a loan alternative would cost for the same need over the same period, and read the reconciliation, stacking and default sections of the agreement. Results here are illustrative arithmetic only; funders set the factor, holdback and every term. Other Pennsylvania guides sit in the resources section.
By Truevale Loans · Updated
