in eCommerce, Merchant Cash Advances are common financial offereings. Both Shopify and Amazon have integrated financial offerings based on your sales data. These offers are often quite appealing: borrow $10,000 and payback $11,000 in 6 months.

At face value these offers seem like a fair market rate like 10% in that case. However, it’s a bit deceiving.

If you had instead borrowed with a term loan, then as you pay down the principal of the debt the interest payments come down as well.

So, borrowing $10,000 at 10% APY, with monthly payments you’d pay back about $10,530. Not $11,000. That’s a big difference!

Here’s the calculator to find the equivalent APY rate for a merchant cash advance. Use this to more fairly compare the cost of credit and wether or not you’d be better off with credit cards

MCA to Annual Interest Calculator (Monthly Payments)

Enter your merchant cash advance details below: