[jotucker1983]

I came across some content online that has me confused can you help explain how they got these numbers :

You are a advanced $20,000, the funding provider quotes you a factor rate of 1.14. So this means you will be expected to pay back $22,800. It might appear like you are paying 14% interest rate.

But the real number you want to look at here is APR. ( If the funding provider is taking 10% of all your future credit card sales your apr would actually be 36.1 and you would repay the advance in 274 days with daily payments of $83.33

Note: If this example is a poor one, can you please create one that illustrates how to calculate the true cost of a MCA

- In this example, the "true cost" of the transaction is $2,800.

- There's no interest rate nor APR associated with a merchant cash advance transaction. A merchant cash advance is a purchase of future receivables.

- Basically, Joe at Joe's Meat Market does $25k a month in V/MC processing volume. A guy from XYZ Capital up the street calls Joe and says that he will buy $30,000 of his upcoming V/MC processing volume, in exchange for providing him $25,000 upfront tomorrow. To collect that $30,000 purchase, the guy from XYZ Capital wants to take 20% of Joe's daily V/MC batches.

- So on this deal in this example, you would have a 20% holdback and a "true cost" of $5,000 which comes out to a cost factor of 1.20, based on the $25,000 advance amount. Based on Joe doing $25k a month in V/MC volume in the past, if he keeps doing that going forward, XYZ Capital should collect their full $30k purchase in 6 months.