How to compare two MCA offers

Why two offers are hard to compare

A merchant cash advance is the purchase of a portion of your future receivables at a discount, not a loan, so it is priced with a factor rate rather than an interest rate. That single difference is what makes two offers so tricky to read against each other. A bank quotes one number, the APR, and the lower one is cheaper. An advance gives you a factor rate, a payback total, a term, a remittance amount, and sometimes a fee, and the cheapest combination is not always the one with the smallest factor rate.

Picture two offers for the same $50,000. One carries a 1.35 factor over a longer term, the other a 1.40 factor over a shorter one. The 1.35 looks cheaper at a glance, and on total dollars it is. But the shorter term on the second offer means the cash leaves your account faster, which changes the true cost of the money over time. To choose well you have to hold both offers to the same yardstick instead of trusting the headline number.

Step 1: get both offers in total dollars

Start with the figure that cannot be spun: the total payback. For each offer, multiply the advance amount by the factor rate, then add any origination or administrative fee. That gives you the real cost of capital, the dollars you pay above what you receive.

Run each offer through the MCA calculator so you are not doing this on a napkin. Enter the amount, the factor, and the term, and it returns the total payback, the cost of capital, and the daily or weekly remittance. Do it once per offer and write down both totals. If one offer has a fee the other does not, fold that fee into the comparison. A lower factor with a heavy fee can quietly cost more than a higher factor with none.

Step 2: convert each to a true APR-equivalent

Total dollars tell you which offer costs more in absolute terms, but they do not account for how long you hold the money. Two offers with the same payback are not equally priced if one is repaid in eight months and the other in fourteen. To capture that, convert each to an APR-equivalent.

An APR-equivalent expresses the cost as a yearly percentage so you can compare an advance against a business line of credit or against another advance on the same scale. It is an estimate for comparison only, not a contractual APR, because an advance is not priced with an interest rate. The factor rate calculator turns a factor and a term into that estimate for you, and our how we calculate true APR page shows the exact method so you can trust the number rather than take it on faith.

Step 3: read the remittance, not just the rate

Two offers can share a payback total and still feel completely different in your account. Before you choose, line up these four things for each:

• The remittance amount, meaning the dollars pulled each business day or each week.
• The frequency, daily versus weekly, since daily debits leave less room on a slow week.
• The term, since a shorter term raises the APR-equivalent even when the total is the same.
• Any fee, holdback percentage, or prepayment language buried in the agreement.

A worked side-by-side

Here is an illustration, not a quote. Offer A is a $50,000 advance at a 1.35 factor over roughly twelve months. Offer B is the same $50,000 at a 1.40 factor over roughly eight months.

Offer A pays back $67,500, a cost of capital of $17,500. Offer B pays back $70,000, a cost of capital of $20,000. On total dollars, Offer A is clearly cheaper by $2,500. But Offer B retires in eight months instead of twelve, so its faster repayment pushes its APR-equivalent higher still. In this case the math agrees with the gut: Offer A wins on both total cost and, for most owners, on monthly breathing room. The lesson is that you only know that for sure once both offers sit on the same screen in the same units.

Let the Compare mode do the heavy lifting

Doing this by hand for two offers is manageable. Doing it under deadline, with a funder waiting on the phone, is where mistakes happen. The Compare mode in the MCA calculator is built for exactly this moment. Enter Offer A and Offer B and it lines them up side by side: total payback, cost of capital, daily or weekly remittance, and the APR-equivalent for each, with the cheaper offer flagged.

That turns a confusing pair of pitches into a single, honest decision. You stop comparing a factor rate against a term against a fee in your head and start comparing one clear total against another. When the difference is close, that clarity is what keeps you from signing the pricier offer because it was presented better.

Comparing your offers

The cheaper offer is almost never the one with the best pitch. It is the one with the lower total payback and, where the totals are close, the lower APR-equivalent for the breathing room you need. Run each offer through the MCA calculator in Compare mode, sanity-check the rate with the factor rate calculator, and read the method on how we calculate true APR so the numbers are yours, not ours.

We are a funding broker, not a lender, so a specialist can walk through both offers with you and show the math without steering you toward a single product. Talk to one, or run your offers through the free calculator first. There is no credit pull to start, and you can see your options or call 866-625-4413.