Merchant cash advance true-cost working model

Download the spreadsheet

The workbook has three sheets. Model holds your figures in yellow cells and shows the results for three takings scenarios side by side. Schedule lists every collection, which is where the APR-equivalent is solved. Notes explains each input and the method. The formulas are ordinary spreadsheet functions (IRR, ROUNDUP) that work in Excel, Google Sheets and LibreOffice.

You will need: the offer (advance, factor rate, any fee taken from the payout, holdback percentage) and your average monthly card takings from recent card statements.

How the model works

1. Total repayment is the advance times the factor rate. The pound cost is that total less the cash you actually received, so an upfront fee adds to it.
2. Takings per trading day are your monthly card takings times 12, divided by the trading days in a year (trading days a week x 365 / 7).
3. Collected per trading day is that figure times the holdback percentage.
4. Number of collections is the total repayment divided by the daily collection, rounded up. The last one is a part collection. That gives the term in calendar days and months.
5. APR-equivalent is the annual rate at which every collection, discounted back to payout with time counted in years of 365 days, is worth the cash you received. This is the equation UK consumer credit APRs use (FCA Handbook CONC App 1.2), rounded to one decimal place.

The model treats collections as evenly spaced through the week. With 7 trading days a week it is the same calculation as our factor rate to APR converter on a daily schedule: 365 collections of the same offer give 73.0% in both.

Worked example

Illustrative figures, not a quote or a market benchmark: a £50,000 advance at factor 1.30 with no upfront fee, a 15% holdback, and a business taking £40,000 a month on card, open 7 days a week.

### Worked example: your figures

| Item | Value |
| --- | --- |
| Total repayment (advance x factor) | £65,000 |
| Cash received | £50,000 |
| Total cost in pounds | £15,000 |
| Card takings per trading day | £1,315.07 |
| Collected per trading day (15%) | £197.26 |
| Number of collections | 330 (last one £101.37) |
| Term | 330 days, 10.8 months |
| Taken by the holdback a month | £6,000 |
| Card takings left a month | £34,000 |
| Share of each collection that is cost | 23.1% |
| Cost per £1 received | £0.30 |
| APR-equivalent | 83.5% |

Source: FundBiz MCA true-cost working model, illustrative figures

Every figure is derived from the stated inputs with the formulas described above. Cost share = total cost / total repayment: of every collection, that share is the provider's charge and the rest repays the advance.

Of the £6,000 the holdback takes each month, about £1,385 is cost and the rest repays the advance. In this model that split is the same for every collection, unlike a repayment term loan, where interest is charged on the balance still owed, so early repayments carry more of it than later ones.

Same offer, different takings

### Takings scenarios: term and APR-equivalent of the worked example

| Scenario | Card takings a month | Collected per day | Collections | Term (months) | Pound cost | APR-equivalent |
| --- | --- | --- | --- | --- | --- | --- |
| Takings 25% lower | £30,000 | £147.95 | 440 | 14.5 | £15,000 | 57.7% |
| Your figures | £40,000 | £197.26 | 330 | 10.8 | £15,000 | 83.5% |
| Takings 25% higher | £50,000 | £246.58 | 264 | 8.7 | £15,000 | 113.4% |

Source: FundBiz MCA true-cost working model, illustrative figures

£50,000 advance, factor 1.30, no fee, 15% holdback, 7 trading days a week. Only card takings change between rows.

The pound cost never moves. What moves is how long you have the money for, and so the annualised rate. A good quarter makes the advance more expensive on an APR basis; a bad one makes it cheaper on paper but ties up more of your takings for longer.

Same takings, different holdback

### Holdback sensitivity: £40,000 card takings a month

| Holdback | Collected per day | Takings left a month | Term (months) | Pound cost | APR-equivalent |
| --- | --- | --- | --- | --- | --- |
| 10% | £131.51 | £36,000 | 16.3 | £15,000 | 50.0% |
| 15% | £197.26 | £34,000 | 10.8 | £15,000 | 83.5% |
| 20% | £263.01 | £32,000 | 8.2 | £15,000 | 124.5% |

Source: FundBiz MCA true-cost working model, illustrative figures

£50,000 advance, factor 1.30, no fee, 7 trading days a week. The holdback percentages are illustrative inputs, not market rates.

Negotiating the holdback down changes your cash flow, not the cost in pounds. If a provider will move on either, the factor rate is the one that saves money; the holdback is the one that keeps the tills funding the business. Our guide to negotiating the daily holdback covers how to ask.

Two more things that change the answer

• An upfront fee. Take £1,000 off the payout and you receive £49,000 but still repay £65,000. The pound cost rises to £16,000 and the APR-equivalent to 92.8%, against 83.5% without the fee.
• Trading days. Spreading the same £40,000 over 6 trading days a week puts more on each day (£230.14 collected) but the term is essentially unchanged (10.9 months) and so is the APR-equivalent (83.4%). Monthly takings matter; which days they fall on hardly does.

Web version

Same formulas as the spreadsheet. Change any figure and the three scenarios update.

Reading the result

• Start with the pound cost and the cost per £1. That is what the advance costs whatever happens to trade. Ask whether the use of the money earns more than that inside the term.
• Then look at takings left a month. The holdback comes off the top of card takings before you pay suppliers, wages or rent. If what is left does not cover those in a quiet month, the advance is too big or the holdback too high.
• Use the APR-equivalent to compare products. Set it against the APR on a term loan or asset finance for the same use of funds. Read it as a range across the scenarios, not a single number, because your takings decide where in the range you land.

If card takings have already fallen and the holdback is squeezing the business, see what to do when card takings collapse under an MCA.

FAQs