Snowvale Business Capital, a small-business funding broker in Greeley, Colorado, offers a free merchant cash advance estimator. From an offer's advance amount, factor rate, holdback and average daily card sales, it estimates total payback, the cost of the advance and the time to remit. A merchant cash advance is not a loan; funders set every term.
Which number goes in which box
| Box | Where to find it |
|---|---|
| Advance amount | The purchase price: what the funder pays for your future receipts |
| Factor rate | The multiplier in the offer; or divide the purchased amount by the purchase price |
| Holdback | The percentage of daily card or bank receipts the funder collects |
| Average daily card sales | Your own figure, from recent processing statements |
The estimator shows the total payback (the purchased amount), the cost of the advance (total payback minus the advance amount) and, if you enter a holdback and daily sales, an estimated number of business days to remit the total.
Working out net proceeds
The advance amount is not always what reaches your bank account. Some contracts deduct amounts at funding, and some pay off an earlier advance out of the new one. To find net proceeds:
- start with the purchase price stated in the contract;
- subtract every amount the contract says will be deducted at funding;
- subtract any balance of an earlier advance that the new one pays off.
What is left is your net proceeds, the cash you can actually use. Compare it with the total payback: the gap between the two is what the advance really costs you. A hypothetical, chosen only to show the arithmetic and not an example of a real offer: a $100 purchase price with $10 deducted leaves $90 of net proceeds; if the purchased amount were $200, the business would remit $200 to have used $90.
If the offer uses fixed debits
Many advances are collected by a fixed daily or weekly debit rather than a percentage of card sales. To estimate the period, divide the total payback by the fixed debit to get the number of debits. Unlike a holdback, fixed debits do not fall when sales fall, unless the contract's reconciliation clause is used.
What the estimate leaves out
- how sales actually move: a holdback finishes sooner in strong weeks and later in slow ones;
- charges during collection that the offer may list separately;
- the effect of daily collections on payroll and supplier payments;
- any other advance or loan already taking part of your receipts.
Before you accept an advance
Put the total payback next to a loan option over a similar period, such as working capital financing or a line of credit, and read the reconciliation, stacking and default clauses. Our merchant cash advance page explains each one. A merchant cash advance is not a loan, and funders set the factor rate and every other term.
By Snowvale Business Capital · Updated