· By Avi Bernstein, CEO, 2M7 Financial Solutions
Merchant cash advances aren't priced like bank financing, so their cost can be hard to compare. There's no annual interest rate. Instead, the funder applies a factor rate to the amount you receive to calculate the total repayment, and that total is set before you sign. The cost of capital is the total repayment minus the advance.
2M7 Financial Solutions is a Canadian direct funder of merchant cash advances. At 2M7, the cost of an advance is a fixed dollar amount agreed before you sign. Multiplying the advance by the factor rate gives the agreed total repayment, before any eligible early payoff discount. Factor rates at 2M7 typically fall between 1.18 and 1.48, so a $50,000 advance has an agreed total repayment between $59,000 and $74,000 and a cost of capital between $9,000 and $24,000.
The agreed cost does not grow while the advance is outstanding, and no interest accrues. The factor rate you're offered depends on the funding amount, how long the business has operated, its monthly revenue and its industry.
The repayment option you choose affects your daily cash flow, and an eligible early payoff can reduce the total cost. Both are covered below, with worked examples for a restaurant, a construction company and a retailer. All dollar amounts are in Canadian dollars.
How do you calculate merchant cash advance costs?
Start with the amount you receive, the total you will repay and the payment coming out of your account. A factor rate is the multiplier used to calculate total repayment. Subtract the advance from that total to get the cost of capital.
Agreed total repayment = Advance × Factor rate
Cost of capital = Agreed total repayment − Advance
With fixed payments, the same amount is paid automatically each business day, and you can call 2M7 to ask about reducing it if revenue drops. Your offer states the payment amount.
With flex payments, the payment is a share of the revenue deposited into your business account each day.
Flex daily payment = Daily revenue × Holdback percentage
The holdback percentage at 2M7 typically ranges from 4% to 30%, depending on the funding amount, revenue and industry. The percentage stays the same and the dollar amount moves with your daily revenue.
What a $50,000 advance costs
On a $50,000 advance, a factor rate of 1.18 means $9,000 in cost of capital. At 1.48, that cost is $24,000.
| Advance |
Factor rate |
Agreed total repayment |
Cost of capital |
| $50,000 |
1.18 |
$59,000 |
$9,000 |
| $50,000 |
1.30 |
$65,000 |
$15,000 |
| $50,000 |
1.48 |
$74,000 |
$24,000 |
Agreed totals are before any eligible early payoff discount. Your offer shows the exact factor rate and agreed total repayment in dollars before you accept it.
Three worked examples
Illustrative examples, not offers. Factor rates and holdback percentages are within 2M7's published ranges, and agreed totals are before any eligible early payoff discount.
| Advance |
Factor rate |
Agreed total repayment |
Cost of capital |
| $50,000 |
1.18 |
$59,000 |
$9,000 |
| $50,000 |
1.30 |
$65,000 |
$15,000 |
| $50,000 |
1.48 |
$74,000 |
$24,000 |
Restaurant. The owner replaces a range and a walk-in cooler. On a day with $3,000 in revenue, $300 goes to repayment. If a slow week drops revenue to $2,000 a day, the payment drops to $200 and repayment takes longer. Changes in sales do not change the agreed $65,000 total. An eligible early payoff can reduce it.
Construction company. A contractor has to buy materials weeks before the client's first progress payment. Revenue arrives in large, irregular deposits rather than steady daily income. This illustration uses fixed payments: the contractor pays the same amount automatically each business day and can call 2M7 to ask about reducing it if a client payment arrives late.
Retailer. A store stocks up in October for the holiday season. In December, daily revenue climbs to $5,000 and the payment rises to $400, so the advance is repaid faster during the busiest weeks. In a quiet January, the payment falls with revenue.
Fixed or flex payments: the same advance two ways
Here is the restaurant's $50,000 advance at 1.30 under each option. For this illustration, both options use the same factor rate and the same agreed total repayment of $65,000, before any eligible early payoff discount.
| Example details |
Fixed payments |
Flex payments (10% holdback) |
| How the payment is set |
The same amount, paid automatically each business day |
A set percentage of daily revenue |
| Daily payment in this example |
Illustrative fixed daily payment: $260 |
$300 on $3,000 in daily revenue, $200 on $2,000, $450 on $4,500 |
| In a slow week |
The payment stays the same; you can call 2M7 to ask about reducing it |
The payment falls with sales |
| In a busy week |
The payment stays the same |
The payment rises and the advance is repaid sooner |
| Agreed total repayment |
$65,000 |
$65,000 |
With fixed payments, the daily amount is the same each business day, which some owners find easier to plan around. With flex payments, the dollar payment decreases when daily revenue falls and increases when it rises.
Does paying early save money?
At 2M7, an eligible early payoff receives a 10% discount on the remaining balance when the account is in good standing and the payment comes directly from your business, not from another funder. Not every funder offers an early payoff discount, so when you compare offers, ask whether paying early changes the amount owed.
Take the restaurant again. It has repaid $40,000 of its $65,000 agreed total, leaving $25,000. An eligible early payoff earns $2,500 off, so the owner pays $22,500 instead. The advance's total cost drops from $15,000 to $12,500.
Ask your funding specialist for the payoff amount and the saving at your current balance.
Factor rate vs APR
A factor rate is not an interest rate. It tells you the total repayment relative to the advance. It does not, by itself, tell you the annualized cost, which also depends on the timing and amounts of payments.
The same factor rate can represent different annualized costs depending on how quickly the advance is repaid, even when the dollar cost stays the same. With flex payments, repayment speed follows your sales.
When you compare offers, compare the agreed total repayment, the effect on daily cash flow and any savings available for an eligible early payoff. Ask for those figures in writing before you accept an offer.
Does 2M7 charge fees beyond the factor rate?
Beyond the cost of capital, 2M7 charges no application, origination, underwriting, documentation, brokerage, servicing, maintenance, renewal or early repayment fees, and no collateral is required. 2M7 does charge a fee when a scheduled payment is returned.
Not every funder prices this way. When you compare offers, check the amount you will actually receive, the agreed total repayment and any separately stated charges.
Frequently asked questions
What is a factor rate?
A factor rate is the multiplier used to calculate the total repayment of a merchant cash advance. Subtract the advance from that total to get the cost of capital. At 2M7, factor rates typically range from 1.18 to 1.48.
What is a holdback percentage?
With flex payments, the holdback is the share of the revenue deposited into your business account each day that goes toward repayment. At 2M7 it typically ranges from 4% to 30%. A 10% holdback on $3,000 in daily revenue is a $300 payment.
How much will I pay back on a $50,000 merchant cash advance?
At 2M7's typical factor rates, the agreed total repayment is between $59,000 and $74,000, before any eligible early payoff discount. Your offer states the exact total before you accept it.
Does a merchant cash advance cost more than a bank loan?
Usually, yes, for a business that qualifies for a bank loan. A merchant cash advance trades a higher cost for speed, repayment that can follow your sales, and an approval that weighs revenue alongside credit. Bank financing often takes longer and asks for more documentation. At 2M7, the cost is a fixed dollar amount agreed before you sign, no interest is charged and no collateral is required.
What are 2M7's minimum eligibility requirements?
2M7's minimum eligibility requirements are a Canadian business operating for at least 3 months, at least $15,000 a month in revenue and no open bankruptcies. Credit score is considered alongside revenue, so a low score does not automatically rule a business out. Meeting the minimums does not guarantee approval.
How quickly does the money arrive?
Approval decisions typically come within 1 business day, and funds are typically deposited within 24 hours of approval.
See what your advance would cost
Ask a 2M7 funding specialist for your factor rate, agreed total repayment, daily payment or holdback percentage, and early payoff conditions in writing before you accept an offer.
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