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Payback Period Calculator

Calculate exactly how long it takes a merchant to repay an MCA based on holdback percentage and daily revenue.

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How Does MCA Payback Work?

MCA repayment works differently from traditional loans. Instead of fixed monthly payments over a set term, the funder withholds a percentage (the holdback) of the merchant's daily revenue. The total repayment amount (RTR) is the funded amount multiplied by the factor rate. If the merchant receives $75,000 at a 1.30 factor rate, the RTR is $97,500. If the holdback is 15% of $3,000 daily revenue, the daily payment is $450, and payback takes approximately 217 business days (about 10 months). This structure means payback speed fluctuates with the merchant's revenue -- during strong months, repayment accelerates; during slow months, it extends. Knowing the payback timeline lets you set honest expectations with the merchant and spot deals where the terms are too aggressive.

How to Use This Calculator

Enter the funded amount and factor rate

These determine the total repayment (RTR). Funded amount times factor rate equals RTR. A $75K deal at 1.30 means $97,500 in total repayment.

Set the holdback percentage

The holdback is the percentage of daily revenue withheld for repayment. Typical range is 10-20%. Higher holdbacks mean faster payback but more cash flow pressure on the merchant.

Enter average daily revenue

Daily payment = daily revenue times holdback percentage. This determines the actual dollar amount debited each business day and drives the payback timeline.

Key Concepts

Factor Rate

The multiplier applied to the funded amount to calculate total repayment. A 1.30 factor rate means the merchant repays $1.30 for every $1.00 funded. Factor rates are not interest rates -- they are fixed regardless of how quickly the advance is repaid.

Holdback Percentage

The percentage of daily revenue withheld by the funder. A 15% holdback on $3,000/day means $450/day is debited. The holdback determines payment speed and merchant cash flow impact.

RTR (Revenue to Receive)

The total amount the funder will collect from the merchant. RTR = funded amount x factor rate. This is the funder's gross revenue on the deal before costs.

Expert Insights

The Holdback Optimization Window: A holdback that is too low extends payback, which means the funder's capital is tied up longer and the merchant pays more in opportunity cost. A holdback that is too high strains cash flow and increases default risk. The sweet spot for most merchants is 12-18% of daily revenue, producing a 6-10 month payback period. Help merchants understand that a slightly higher holdback with a lower factor rate often costs less total than a low holdback with a high factor rate.

Seasonal Revenue and Payback Variability: For seasonal businesses (restaurants in summer tourist areas, retail around holidays, landscaping in spring/summer), the average daily revenue assumption can be misleading. If the MCA is funded during peak season, the payback estimate based on peak revenue will be optimistic. During off-season, the holdback may barely cover the daily payment. Model payback using off-season revenue for a conservative estimate.

Frequently Asked Questions

No. A factor rate is a fixed multiplier on the funded amount. A 1.30 factor rate on a 6-month payback period is roughly equivalent to 60% APR, but a 1.30 factor rate on a 12-month period is closer to 30% APR. The cost depends on the payback speed, which is why APR disclosure (required in some states) tells a more complete picture than factor rate alone.

With a true percentage-based holdback, the daily payment decreases proportionally when revenue drops. This is a key advantage of MCAs over fixed-payment loans. However, some funders use fixed daily ACH payments (not true holdbacks), which do not adjust. Verify whether your funder uses percentage or fixed payments.

In most MCA agreements, the full RTR is owed regardless of payback speed -- there is no early-payoff discount. Some funders now offer partial rebates for early payoff (especially in states with disclosure requirements), but this must be explicitly stated in the agreement. As a broker, inform your merchants about this before funding.

Results are estimates for educational purposes only. Actual amounts may vary based on your specific financial situation, market conditions, and other factors. This calculator does not constitute financial advice.