MCA factor rate to effective APR converter

What this calculates

Merchant cash advance pricing in the UK is published as a factor rate (a flat multiple of the advance, e.g. 1.30) plus an expected term and a daily holdback percentage. Factor rate alone does not tell you the cost of capital because it ignores the time over which repayment lands. The same factor rate over 6 months versus 18 months produces materially different effective APRs. This converter takes a factor rate and an expected term and returns the equivalent APR on an amortising-loan basis, which is the right number to compare against term-loan and asset-finance alternatives.

The maths in plain English

Step 1: total cost as a percentage of the advance. Subtract 1 from the factor rate. A factor of 1.15 produces a total cost of 15 percent of the advance. A factor of 1.30 produces a total cost of 30 percent. A factor of 1.45 produces a total cost of 45 percent.

Step 2: annualise the cost using the expected term. Divide the total cost percentage by the expected term in months, then multiply by 12. This gives a simple-interest annualised cost. A 30 percent total cost over 9 months annualises to (30 divided by 9) times 12, which is 40 percent simple-interest APR.

Step 3: apply the amortising-equivalent uplift. Because MCA repayment is daily (a fixed percentage of card take) the principal balance amortises down faster than a flat-rate loan would suggest. The equivalent APR for comparison against an amortising term loan is roughly 1.7 to 1.9 times the simple-interest annualised number. A 30 percent factor over 9 months produces an equivalent APR of roughly 70 to 75 percent on an amortising-loan basis.

The 1.7 to 1.9 uplift is empirical. The exact multiple depends on the daily holdback percentage, the smoothness of card flow and the contractual treatment of early settlement. For a quick comparison, treating MCA as 1.8 times the simple-interest equivalent gets within a couple of percentage points of the true amortising-equivalent APR.

Worked example: factor 1.15 over 6 months

£50,000 MCA advance. Factor 1.15 means total repayment £57,500. Total cost £7,500, which is 15 percent of the advance. Expected term 6 months.

Simple-interest annualised. 15 percent over 6 months annualises to 30 percent.

Equivalent APR (amortising-loan basis). 30 percent times 1.8 equals 54 percent.

Comparison. A clean-credit applicant could likely get a 6-month commercial term loan at 8 to 12 percent APR. The MCA equivalent is roughly 5 times more expensive in APR terms. The MCA case is justified only if the applicant cannot access the term-loan route, the speed-to-funding is the binding constraint (MCA settles in days, term loan in 1 to 4 weeks), or the cashflow shape genuinely fits MCA better.

Worked example: factor 1.30 over 9 months

£75,000 MCA advance. Factor 1.30 means total repayment £97,500. Total cost £22,500, which is 30 percent of the advance. Expected term 9 months.

Simple-interest annualised. 30 percent over 9 months annualises to 40 percent.

Equivalent APR (amortising-loan basis). 40 percent times 1.8 equals 72 percent.

Comparison. The factor 1.30 over 9 months is the median UK MCA quote band as of May 2026. The 72 percent equivalent APR puts MCA materially above term-loan alternatives but inside the band where MCA can still make sense for short-term working capital, post-decline applicants and businesses with strong card flow but weaker credit-file evidence. Capify and 365 Business Finance are the standard mainstream UK MCA reference points.

Worked example: factor 1.45 over 12 months

£40,000 MCA advance. Factor 1.45 means total repayment £58,000. Total cost £18,000, which is 45 percent of the advance. Expected term 12 months.

Simple-interest annualised. 45 percent over 12 months annualises to 45 percent.

Equivalent APR (amortising-loan basis). 45 percent times 1.8 equals 81 percent.

Comparison. Factor 1.45 is at the top of the UK MCA band, normally reserved for higher-risk applicants and stacked-MCA refinances. At 81 percent equivalent APR, the cost of capital is heavy. The borrower question becomes: is this the right product, or is asset-backed lending or specialist post-decline term lending a better answer? Bizcap, JPM Capital and Bolton Finance underwrite at higher pricing but on amortising structures that compare favourably to a 1.45 factor MCA in equivalent-APR terms.

When this number matters

Convert factor rate to APR before signing the MCA contract. Most UK MCA lenders publish factor rate first and APR equivalent second (or not at all). Without the conversion, two products at apparently similar factor rates can be radically different in cost of capital. A 1.30 over 6 months and a 1.30 over 18 months are roughly 90 percent and 30 percent equivalent APR respectively, on the amortising basis.

Convert again before stacking a second MCA on top of an existing one. Stacking compounds the cost. The blended APR across multiple MCAs is almost always above 60 percent, often above 80 percent, and usually pushes the affordability envelope past sustainable. See the blended cost of capital calculator for stacked-facility comparisons.

Edge cases

Variable expected term. The expected term in an MCA contract is an estimate. Strong card flow shortens it, weak card flow extends it. The equivalent APR moves accordingly. Most contracts have a "fixed total cost" rather than a "fixed APR", so the borrower carries the term variability.

Early-settlement discount. Some MCA contracts include a discount on early settlement. A 1.30 factor over an expected 9 months that pays off in 6 months might attract a 5 to 10 percent discount on the unpaid factored cost. Factor that discount into the equivalent APR calculation; it can knock 5 to 15 percentage points off.

Stacked MCAs. Multiple concurrent MCAs split daily holdback across multiple lenders. The combined holdback often exceeds 25 percent of daily card take, which suffocates trading cashflow. The blended APR across stacked MCAs is almost always punitive; refinancing onto a single term loan or asset-backed facility is normally the better answer.

Renewal pressure. Some MCA lenders pitch a new advance once the existing balance is around 50 percent paid down. The new advance pays off the existing balance plus extras for working capital. This is a refinance event; the equivalent APR on the new advance should be calculated and compared against alternatives, not just accepted because it is offered.

Joint-and-several PG implications. MCA is normally written with a director PG, often joint-and-several. The PG sits behind the company-side advance. See the PG explainer for what that means at enforcement.

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