The two numbers
The FTC describes an MCA as repaid with the advance plus a factor, often 20% to 50% of the amount, collected as a fixed percentage of the business's daily revenue or a fixed amount that estimates it. That percentage for one advance is its specified percentage, which New York and California's disclosure rules call the split rate. With other positions on the file, what matters is the total every position takes together.
- Debt-to-revenue is what existing positions take each month as a share of average monthly true revenue.
- The holdback cap is the share of true revenue that all debt payments together, existing and new, are allowed to take.
Use true revenue, not gross deposits. Transfers, owner money and earlier advances inflate deposits and make room that doesn't exist.
Convert every payment to a month
| Cadence | Multiply the payment by | Example payment | Monthly |
|---|---|---|---|
| Daily | 21.7 | $289 | $6,271 |
| Weekly | 4.33 | $1,150 | $4,980 |
| Biweekly | 2.17 | $2,000 | $4,340 |
| Monthly | 1 | $3,500 | $3,500 |
21.7 is the average number of business days in a month, which is when daily pulls land.
Worked example
A merchant with $60,000 of average monthly true revenue has two open positions: $289 a business day and $1,150 a week. You allow 30% of revenue for all debt, and the new advance would be 120 daily payments at a 1.35 factor rate.
| Step | Working | Result |
|---|---|---|
| Existing monthly debt | $289 × 21.7 + $1,150 × 4.33 | $11,251 |
| Debt-to-revenue | $11,251 ÷ $60,000 | 18.8% |
| Holdback cap | $60,000 × 30% | $18,000 |
| Room for the new advance | $18,000 − $11,251 | $6,749 a month |
| New daily payment | $6,749 ÷ 21.7 | $311 |
| Total payback | $311 × 120 payments | $37,320 |
| Funded amount | $37,320 ÷ 1.35 | $27,644 |
| Term | 120 ÷ 21.7 | 5.5 months |
If existing debt already takes the whole cap, there's no room for a new payment unless a position is paid off from the new advance.
Check the account can carry it
Revenue says whether the payments are affordable over a month; the daily balance says whether they clear on the day. Divide monthly debt by 21.7 to get the daily debt, then count the days the account closed below it. Average daily balance divided by the daily debt, existing plus new, gives the payment days of runway the balance covers. In the example, $14,000 of average daily balance against $829 a day is about 17 payment days.
Run rate versus what cleared
The headline ratio uses each position's monthly run rate, which is what the merchant owes going forward. Month by month, compare what actually cleared: debt debits minus pulls that came back, over that month's true revenue. A month well below the run rate points to missed or returned pulls.