Business Cash Advance Rate Example
Here's an example of a $30,000 advance with a factor rate of 40% and a daily retrieval rate of 20%:
Advance amount funded |
$20,000 |
Provider fee ($30,000 x 40%) |
$12,000 |
Total repayment |
$32,000 |
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Average daily net credit card processing |
$4,000 |
Provider's daily take ($4,000 x 20%) |
$800 |
Repayment timeframe ($32,000 / $800) |
40 days |
Note that this still leaves you with a daily net of $3,200 from credit card transactions, allowing you to continue your day-to-day operations. Cash is not mentioned in this equation.
If your business is humming right along and exceeds expectations, the provider may increase the daily rate to pay off the debt sooner provided this in your contract. In contrast, again if in your contract, the provider can drop your rate if you experience a sales slump so you don’t struggle during slow and lean periods.
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