Understanding how your funding options are calculated is the first step toward making a smart financial decision. This guide breaks down the process, aligning with the transparent methodology used in our MCA Calculator.

Step 1: Determine the Funding Amount (or Advance Amount)

This is the simplest part: the funding amount is the lump sum of cash you receive upfront from the lender. If you are approved for and accept $50,000, that is your funding amount.

Step 2: Understand the Wholesale Rate (or Buy Rate)

Instead of an interest rate, MCAs use a decimal figure called a factor rate. On our calculator, we refer to this as the “Wholesale Rate, or Buy Rate.” This represents the lender’s base rate for the advance, before any commissions or fees are added.

This rate is not arbitrary; it’s based on the lender’s assessment of risk, considering factors like your monthly revenue, credit score, and time in business, as reflected in our calculator’s inputs. A lower rate typically signifies a lower risk profile.

Step 3: Calculate the Total Wholesale Repayment Amount

To find the base amount you will repay to the lender, you multiply the funding amount by the wholesale rate.

Formula: Funding Amount × Wholesale Rate = Total Wholesale Repayment

Example Calculation: Funding Amount: $50,000
Qualified Wholesale Rate: 1.30 (Based on a Tier 2 risk profile)$50,000 × 1.30 = $65,000In this scenario, the total wholesale repayment amount is $65,000. This consists of the original $50,000 advance plus $15,000 in fees to the lender.

Step 4: Calculate the Fixed Weekly Payment

Unlike some MCAs that take a variable percentage of daily sales (a “holdback”), many modern working capital loans use a fixed, predictable repayment schedule. This is calculated by dividing the Total Repayment Amount by the number of weeks in the term.

Formula: Total Repayment Amount ÷ Number of Weeks in Term = Fixed Weekly Payment

Example Calculation (continued):Total Repayment: $65,000
Term Length: 6 Months (approx. 26 weeks)$65,000 ÷ 26 weeks = $2,500 per weekThis means a fixed amount of $2,500 would be debited from your bank account each week until the advance is fully repaid.

Key Considerations to Remember

1. Fixed vs. Variable Payments: Our calculator models a fixed weekly payment. The advantage is predictability for your cash flow planning. The disadvantage is that this payment remains the same even if your sales slow down, unlike a percentage-based holdback which adjusts with revenue.

2. Understanding Your Final Cost: The “Wholesale Rate” is the starting point. Your final, all-in cost will include a fully disclosed broker commission. Your Loan Consultant will provide a clear breakdown of the final repayment amount. Always use this final figure to assess the total cost of your advance and compare offers.

3. Comparing to APR: Because MCAs are short-term products, their factor rates can translate into high Annual Percentage Rates (APRs). It is essential to understand the total cost in dollars and the impact on your cash flow to ensure it aligns with your business goals.