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A merchant cash advance isn't regulated as a loan, so providers aren't required to quote an APR — which is why one rarely appears on the paperwork. The effective rate here is calculated the same way an APR is: from the cash you actually receive, the payments you actually make, and how long they take. It assumes your card takings hold steady at the figure you entered; in reality they'll move, and the repayment period moves with them. Two things worth checking in any offer that this calculator can't see: whether the holdback applies to all revenue or card sales only, and what happens if you switch card provider mid-term — some agreements treat that as a default. Also ask whether early settlement reduces the amount repayable. With most advances it does not; the factor rate is fixed at the outset, so paying it off early simply means paying the same total over a shorter period.
A merchant cash advance gives you a lump sum in exchange for a fixed share of your future card takings until an agreed total is repaid. The price isn't quoted as an interest rate but as a factor rate — a multiplier like 1.3, meaning £20,000 advanced becomes £26,000 repayable. Because that total never changes and there's no interest accruing over time, the cost looks fixed and modest. What it doesn't tell you is the one thing that matters for comparison: how much you're paying for the use of the money, per year.
That's what this merchant cash advance calculator works out. It takes the advance, the factor rate, your card turnover and the holdback percentage, calculates how long the repayments take to clear the balance, and converts the whole cash flow into an effective annual rate — then prices the same amount as an ordinary amortising business loan over the identical period so you can see both totals side by side. UK factor rates typically run 1.1 to 1.5 with holdbacks of 10–25%, and the resulting effective rates commonly land anywhere from around 40% to well over 200% a year. Figures reflect the UK market as at July 2026.
Because you don't have the full advance for the full period. Repayments start immediately and chip away at the balance, so on average you're only holding a fraction of the money — but you're paying the whole 30% regardless. Repay a 1.3 factor rate over six months and the effective annual rate is roughly 160%, not 30%. The shorter the repayment period, the higher that figure climbs.
In effective-rate terms, yes — and this is the part that catches people out. The total repayable is fixed, so strong sales just clear it faster, meaning you paid the same amount for the use of the money over less time. A quiet month works the other way: the term stretches and the effective rate falls. The flip side is genuine, though — repayments flex with your takings, so a bad month doesn't produce a fixed direct debit you can't meet.
When speed or flexibility is worth the premium and the alternatives aren't open to you: funding a short, well-defined opportunity that pays back quickly, bridging a seasonal gap where fixed repayments would be dangerous, or when a thin trading history rules out a bank. Where it goes wrong is using one to cover an ongoing shortfall — the holdback reduces the takings available to service the next advance, and stacking them is how businesses end up refinancing repeatedly at these rates.