What a merchant cash advance really costs, and how to compare it

A merchant cash advance usually arrives with one number attached: the total you’ll repay. There’s no familiar loan comparison on the page, and the daily deductions are small enough that each one feels manageable. That’s why so many owners only realise what an advance is costing when two or three are running at once and the account is empty by Wednesday. This guide shows how to turn an advance into numbers you can compare, so you can decide calmly whether to keep it, pay it out or refinance it.

All the figures below are illustrative and invented. Use your own agreement for real numbers.

How is a merchant cash advance structured?

There are two common shapes.

Structure	How repayments work	What changes the timing
Percentage of card sales	A set share of each day’s card settlements goes to the provider	Busier days repay more; quiet days repay less
Fixed daily or weekly debit	A fixed amount leaves the account on each business day or week	Nothing; it’s taken regardless of sales

Both have a total repayable fixed at the start, which is the amount you received plus the provider’s charge. Many providers also register a security interest on the PPSR, sometimes over all of the business’s present and after-acquired property. The PPSR, run by the Australian Financial Security Authority, is the public register where those interests are recorded, so it’s worth searching it to see what’s registered against your business.

Step 1: work out the dollar cost

This is the simplest and most important number.

Dollar cost = total repayable − amount received

Item	Illustrative advance
Amount received	$50,000
Total repayable	$64,000
Dollar cost	$14,000

If any fees were deducted from the amount you received, use the amount that actually arrived in your account, not the headline figure. That makes the cost slightly higher, and it’s the honest comparison.

Step 2: work out how long it really takes

The dollar cost means different things over different periods. $14,000 over twelve months is not the same as $14,000 over five months. Look at your agreement for the expected term, then check your bank statements for the real pace.

Item	Illustrative advance
Fixed daily debit (business days)	$640
Business days to repay $64,000	100
Approximate calendar time	About 20 weeks

Twenty weeks to pay $14,000 for $50,000 of cash is a short, expensive period. Write down your own version: dollar cost, and weeks to repay.

Step 3: measure the daily drain

The headline cost is only part of the story. For most owners the bigger problem is how much leaves the account every day, relative to what comes in.

Item	Illustrative business
Average daily deposits (business days)	$3,200
Daily MCA debit	$640
Share of daily deposits going to the advance	One fifth

One fifth of every day’s deposits leaving before rent, wages, stock or the ATO is a lot. On a slow day, the debit can exceed the day’s takings. That’s how one advance quietly creates the need for a second.

Already juggling more than one advance? Talk to a specialist about refinancing, and the enquiry won’t touch your credit file.

Step 4: add up the stack

Stacking is where advances turn from expensive to dangerous. Here’s an illustrative stack:

Advance	Daily debit	Remaining to repay
First advance	$640	$38,400
Second advance	$420	$33,600
Third advance	$300	$27,000
Total	$1,360	$99,000

Now set $1,360 a day against the same $3,200 average deposits. Over two fifths of each day’s income is leaving before anything else is paid. No business plan survives that for long. At this point, the dollar cost of each advance matters less than the combined drain, and the most useful question becomes: what would replace all three with one manageable repayment?

Step 5: compare with a loan, in dollars

To compare fairly, use the same amount and a realistic period, and look at total dollars. A loan will quote a rate and fees, but every loan is priced on the business’s circumstances, so ask any lender for the total repayable in dollars over the term and the repayment amount and frequency. Then line them up:

Question	MCA stack	Refinance loan (ask the lender)
Total still to repay	$99,000	Total repayable over the term
Amount leaving each week	Five days of debits	Weekly or monthly repayment
Time to repay	Fixed by the advances	Matched to the business’s capacity
Security	Often a general PPSR registration	Property or director guarantee, depending on route
Predictability	Daily, regardless of sales	One known amount on a known day

A refinance might cost more in total dollars if it runs longer, or less if the advances were very expensive. Often the decisive benefit isn’t the total; it’s that the weekly outgoing drops to a level the business can actually carry, which stops the cycle of new advances. Our page on refinancing a merchant cash advance covers how the payout works.

Step 6: check the early payout terms

Ask each provider, in writing:

1. What is the payout figure if I pay in full on a specific date?
2. Does paying early reduce the total, or is the full amount due regardless?
3. How and when will you release any PPSR registration once paid?

Some agreements fix the total; paying early then saves nothing on that advance, but still frees up the daily cash flow. Others discount. Either way, you need the figure in writing before a refinance can be settled.

Are there contract terms you should look at?

Read the agreement for anything unexpected: fees for missed debits, default charges, what happens if sales drop, and whether the provider can increase the deduction. ASIC notes that unfair contract term protections can apply to small business contracts, including financial products, where the business has fewer than 100 employees or turnover under $10 million and the upfront price is within the cap. If a term looks one-sided, get independent advice before agreeing to any changes.

When is an MCA reasonable, and when should you get out?

Reasonable	Time to get out
One advance, short term, specific purpose	Two or more advances running together
Strong, steady card sales	Debits exceeding takings on slow days
Purpose pays for itself quickly (stock that sells)	Advance used to cover wages, tax or losses
Daily debit a small share of deposits	Suppliers or the ATO falling behind

If you’re in the right-hand column, refinancing is usually the fix. With property, consolidating with property equity gives the most breathing room. Without property, an unsecured cash-flow loan sized on your statements can replace several advances with one repayment.

What should you do this week?

1. Pull every MCA agreement and list the provider, amount received, total repayable and daily debit.
2. Check your bank statements for the actual amounts leaving each day.
3. Work out the combined daily drain as a share of average deposits.
4. Ask each provider for a written payout figure.
5. Stop taking new advances.
6. Use the solution finder, ticking “existing expensive short-term debt”, to see which refinance routes fit.

What if sales drop while an advance is running?

With a percentage-of-sales structure, repayments fall on quiet days, which helps cash flow but stretches the time to repay. With a fixed daily debit, the amount leaves regardless. If takings have fallen, ask the provider in writing what options exist under your agreement and keep records of every conversation. Don’t assume a verbal promise to reduce debits will be honoured.

Ready to swap the sweep for one repayment?

If the numbers above describe your account, there’s usually a cleaner way to carry the debt. Enquiring with us involves no credit check, and we won’t scatter your details across a list of lenders. A specialist reads your situation, calls you and maps the payout. Please list every advance on the form as accurately as you can, with payout figures if you have them, so the refinance we suggest clears the whole stack at once. See if you qualify.