Is Your MCA Killing Your Business? The Math Behind 1.4x Factor Rates vs 8fig's Flat Fee
- Jason Feimster
- 3 days ago
- 10 min read
Your MCA broker said "1.4×" sounded reasonable. Then you paid back $70,000 on a $50,000 advance in six months—and realized you just funded your business at 147% APR.
Most eCommerce sellers don't know they're bleeding cash until the daily debits start choking their operating account. Factor rates hide the real cost. 8fig's flat fee doesn't.
Why Banks Fail eCommerce Sellers
Traditional banks don't speak eCommerce. They want two years of tax returns, collateral you don't have, and 90 days to maybe say yes. By then, your competitor bought the inventory you needed and owns your best-selling ASIN.
Why conventional lenders can't keep up with your business:
Payout velocity doesn't fit their model – Amazon holds funds 14 days, Shopify disputes can freeze cash for weeks, but your supplier invoice is due now
Inventory isn't "real" collateral – banks value fixed assets; your $80K in FBA stock sitting in a warehouse doesn't count
Seasonal spikes look like risk – Q4 revenue that's 4× your average month triggers red flags, not green lights
They fund yesterday's business – tax returns show what you earned last year, not the $200K order you need to fulfill next month
So sellers turn to MCAs. Fast approval. No collateral. But the cost is quietly devastating.
5 Plays to Cut Funding Costs (This Week)
Below are five practical moves you can implement right away to stop overpaying on capital and make your funding costs predictable. Each play is designed to help you spot hidden factor-rate math, compare alternatives like flat-fee funding, and choose terms that actually match your inventory and cash-flow cycle.
Play 1: Run the Real APR Math on Your Current MCA
What it is:
Most MCA brokers pitch a "factor rate" like 1.4x and call it "40% for the money." That's not your cost. That's your payback multiplier. Your real annualized percentage rate (APR) depends on how fast you pay it back.
When it works best:
Before you sign anything. Before you renew. Especially if you're being told "it's just like 40% interest."
The formula:
APR = [(Factor - 1) ÷ Term in years] × 100
Example: You borrow $50,000 at 1.4x, repaid over 6 months.
Payback = $70,000
Fee = $20,000
Term = 0.5 years
APR = [(1.4 - 1) ÷ 0.5] × 100 = 80%
If you pay it back in 4 months? 120% APR.
If you pay it back in 3 months? 160% APR.
Common pitfalls:
Confusing the factor (1.4x) with the interest rate (40%).
Not adjusting for how daily/weekly ACH pulls accelerate repayment.
Ignoring origination fees, which pile on top of the factor.
What you need to qualify:
Your MCA agreement (factor, advance amount, payback schedule).
Your actual repayment timeline (how many weeks/months did it take?).
A calculator or spreadsheet.
Operator checklist:
[ ] Pull your last MCA agreement.
[ ] Calculate the true APR using the formula above.
[ ] Compare that APR to your gross margin. If APR > margin, you're losing money on every dollar borrowed.
[ ] Screenshot the math. Show it to your team. Pin it to your wall.
Play 2: Map Your Cash Conversion Cycle to Funding Terms
What it is:
Your cash conversion cycle (CCC) is the number of days between paying your supplier and collecting cash from your customer. If your CCC is 90 days, you need funding that gives you at least 90 days to turn inventory into revenue—preferably more.
Most MCAs repay in 3–6 months via daily ACH. That means you're servicing debt while inventory is still sitting in a warehouse or in transit. Flat-fee funding (like 8fig's 8–12% model) stretches repayment over 6–12 months, synced to your revenue curve.
When it works best:
You're ordering inventory 60–120 days before peak season.
You're scaling into Q4 but cash flow is tight in Q2/Q3.
You've been burned by daily ACH pulls that drained your account before inventory sold.
The mini-framework: CCC Funding Fit Test
Calculate your CCC: Days Inventory Outstanding + Days Sales Outstanding - Days Payables Outstanding.
Add a buffer: CCC + 30 days = minimum funding term you need.
Compare to funding options: If funding term < CCC + 30, you'll be underwater.
Example:
DIO: 60 days (inventory sits)
DSO: 45 days (Amazon pays you)
DPO: 30 days (you pay supplier)
CCC = 60 + 45 - 30 = 75 days
Minimum term = 75 + 30 = 105 days (3.5 months)
If your MCA wants daily payback over 90 days, you're already overleveraged.
Common pitfalls:
Ignoring platform payout delays (Amazon reserves, Shopify holds).
Not accounting for returns, chargebacks, or slow-moving SKUs.
Assuming all inventory will sell at full margin (it won't).
What you need to qualify:
Last 3 months of inventory reports.
Average days to sell through.
Platform payout schedules.
Supplier payment terms.
Operator checklist:
[ ] Calculate your actual CCC using the formula above.
[ ] Add 30–60 days for safety margin.
[ ] Only consider funding with terms longer than your CCC + buffer.
[ ] If you're already in an MCA with shorter terms, model out when you'll break even vs when payments hit.
Play 3: Build a Cost-of-Capital Scorecard
What it is:
A one-page comparison of every funding option you're considering—side by side—so you can see the total cost, cash impact, and flexibility at a glance.
When it works best:
You're comparing multiple offers (MCA, term loan, revenue-based financing, invoice factoring, 8fig).
You're deciding whether to renew or switch.
You need to justify a funding decision to a partner, CFO, or lender.
The scorecard template:
Funding | Amount | Fee / Interest | Term | Repay Type | True APR | Cash Impact | Pre-pay Penalty? | Personal Guarantee |
$50K | $20K | 6 mo | Daily ACH | 80% | ~$380/day | No | Yes | |
$50K | $4K–$6K | 12 mo | Cash flow | 8–12% | Scales w/ sales | No | No | |
$50K | $7.5K | 24 mo | Monthly | 15% | ~$2,400/mo | Maybe | Yes | |
$30K | Variable | Revolving | Monthly | 18–24% | Depends | No | Sometimes |
Common pitfalls:
Only comparing "fee" or "interest rate" without calculating APR.
Ignoring repayment structure (daily vs monthly makes a huge difference to cash flow).
Not asking about prepayment penalties or personal guarantees.
What you need to qualify:
Offers in writing (email, term sheet, agreement).
Calculator to convert fees into APR.
Your projected monthly revenue (to estimate daily cash impact).
Operator checklist:
[ ] Request written terms from every funding source.
[ ] Fill out the scorecard for each option.
[ ] Highlight the option with the lowest APR and the most flexible repayment structure.
[ ] Share the scorecard with your team or advisor before signing.
Play 4: Stress-Test Your Funding Against a Revenue Drop
What it is:
A "what-if" model that shows whether you can still make payments if revenue drops 20%, 30%, or 50%. Most sellers over-leverage during high season and get crushed when sales dip.
When it works best:
Before peak season funding decisions.
If you're running paid ads with volatile ROAS.
If you've ever had to borrow more just to make payments.
The stress-test framework:
Baseline scenario: Your average monthly revenue for the last 3 months.
Stress scenarios:
Light stress: Revenue drops 20%.
Moderate stress: Revenue drops 30%.
Severe stress: Revenue drops 50%.
Calculate payment as % of revenue in each scenario.
Example:
Baseline revenue: $100K/month
MCA payment: $11,400/month (daily ACH totaled)
Baseline payment % = 11.4%
Scenario | Revenue | Payment | Payment as % of Revenue | Survivable? |
Baseline | $100K | $11,400 | 11.4% | Yes |
Light stress | $80K | $11,400 | 14.3% | Tight |
Moderate stress | $70K | $11,400 | 16.3% | Painful |
Severe stress | $50K | $11,400 | 22.8% | No |
Now run the same model with revenue-based repayment (like 8fig):
Payment scales with revenue (e.g., 15% of weekly sales).
In the severe stress scenario, payment drops to $7,500/month instead of staying fixed at $11,400.
Common pitfalls:
Assuming revenue will stay constant or grow.
Not modeling ad spend cuts, platform fees, or supplier delays.
Ignoring the psychological toll of fixed payments during slow months.
What you need to qualify:
Last 6 months of revenue data.
Payment schedule from your funding agreement.
A spreadsheet or calculator.
Operator checklist:
[ ] Run the stress-test for your current funding (or any new offer).
[ ] If payment exceeds 20% of revenue in the moderate stress scenario, it's too risky.
[ ] Prioritize funding with flexible or revenue-based repayment.
[ ] Keep a 90-day cash reserve separate from operating funds.
Play 5: Know When to Walk Away from "Easy Money"
What it is:
A decision tree to help you say no to predatory funding—even when you're desperate.
When it works best:
You're being pitched by a broker who found you on LinkedIn.
You're between funding rounds and cash is tight.
You're tempted to stack multiple MCAs.
The decision tree:
Question 1: Is the APR over 50%?
Yes → Walk away. No exceptions.
No → Continue.
Question 2: Does repayment start before your inventory sells?
Yes → Walk away unless you have 6+ months of cash reserves.
No → Continue.
Question 3: Is there a personal guarantee or lien on your home/assets?
Yes → Only proceed if APR is under 20% and you have a clear exit plan.
No → Continue.
Question 4: Can you prepay without penalty?
No → Walk away. You need flexibility.
Yes → Continue.
Question 5: Will this funding increase your revenue or just cover a gap?
Gap → Walk away. Fix the gap first (cut costs, renegotiate terms, find a partner).
Growth → Proceed, but only if you've passed all previous questions.
Common pitfalls:
Confusing "approval speed" with "good terms."
Stacking multiple MCAs to cover payments on the first one (debt spiral).
Signing because "everyone else does it."
What you need to qualify:
The discipline to walk away.
A backup plan (credit line, investor, selling slow inventory, cutting expenses).
Operator checklist:
[ ] Run every funding offer through the decision tree above.
[ ] If you fail any question, pause for 48 hours before signing.
[ ] Call a mentor, advisor, or fellow operator to gut-check the deal.
[ ] Remember: No funding is better than bad funding.
Compare Funding Options
Check out the chart below to compare funding options or click the link to get funding for your business now.
Funding | Best For | Speed | Cost Range | Requirements | Biggest Risk |
eCommerce sellers with $100K+ annual revenue who need flexible, recurring funding for inventory & ads | 3-5 days | 8-12% flat fee (fixed, not compounding) | $100K+ annual revenue, established sales history, multi-channel preferred | Revenue-based remittance — if sales tank, payback slows but fee doesn't disappear | |
Desperate sellers who need cash today and have no other options | Same day to 24 hrs | 1.2x–1.5x factor (often 80-200%+ APR equivalent) | Processing $5K+/month in card sales; pulse | Daily debits drain your account fast — one slow week and you're in a death spiral | |
Established businesses with strong credit, collateral, and 2+ years of audited financials | 30-90 days | 6-10% APR (actual interest rate) | 680+ credit score, collateral, multi-year profitability, personal guarantee | Rigid terms — miss a payment and they can seize assets or sue | |
Revenue-Based Financing (non-8fig) | Growing sellers who want speed + flexibility but can't qualify for traditional loans | 3-7 days | 12-20% flat fee or % of revenue until cap is hit | $250K+ annual revenue, consistent monthly sales, sometimes platform integration required | Fee caps can be murky — read the fine print or you'll pay more than expected |
Product-based sellers who need to pay suppliers upfront and have proven SKU velocity | 7-14 days | 1-3% per month (12-36% annualized) | Purchase orders or invoices, SKU-level sales data, sometimes personal guarantee | Inventory doesn't move as planned? You're stuck paying on dead stock | |
Sellers with strong personal or business credit who need short-term float for ad spend or small inventory buys | Instant | 0% intro APR for 12-18 months, then 18-29% APR | 700+ credit score, low debt-to-income ratio, established credit history | Miss the promo window and you're paying credit card rates on inventory — brutal for cash flow |
8fig's Flat -Fee Funding
Frequently asked questions
What is a factor rate in merchant cash advance (MCA)?
A factor rate is a multiplier—typically 1.2x to 1.5x—applied to the amount you borrow from an MCA provider. For example, a $50,000 advance at 1.4x means you repay $70,000 total. Unlike an interest rate, the factor rate is fixed and doesn't change based on how quickly you repay.
How do you calculate the APR on an MCA factor rate?
To estimate APR from a factor rate, subtract 1 from the factor (e.g., 1.4 – 1 = 0.4 or 40%), divide by the repayment term in years, then multiply by 365 days and the payback period in days. For a 1.4x factor repaid over 6 months: (0.4 ÷ 0.5) × 100 ≈ 80% simple interest, but daily deductions can push the effective APR above 100%.
What is 8fig's flat fee and how does it work?
8fig charges a flat fee of 8–12% on the total funding amount, applied once upfront. There are no daily or weekly deductions; you repay a fixed percentage of revenue on a schedule you control. This makes cash flow predictable and total cost transparent from day one.
Is 8fig cheaper than a merchant cash advance?
Yes, in most cases. An MCA with a 1.4x factor rate can cost 80–147% APR depending on repayment speed, while 8fig's flat fee translates to an effective APR of 8–12% annually. For a $50,000 advance, that's a difference of $47,000+ in total cost.
Can I pay off 8fig funding early without penalties?
8fig funding is flexible and tied to your revenue share, so there are no traditional prepayment penalties. The flat fee is fixed, meaning early repayment doesn't increase your cost—unlike an MCA, where faster payback can raise the effective APR.
What types of ecommerce businesses qualify for 8fig funding?
8fig works with Amazon FBA sellers, Shopify store owners, and multi-channel ecommerce businesses that have consistent monthly revenue. You typically need at least $100,000 in annual sales and a track record of inventory turnover.
How long does it take to get approved for 8fig funding?
8fig's application process takes 1–2 business days for approval, and funding can be released within 48 hours. You connect your sales channels (Amazon, Shopify, etc.) so 8fig can assess revenue in real time without requiring tax returns or lengthy paperwork.
What is the difference between a factor rate and an interest rate?
An interest rate accrues over time and is expressed as an annual percentage (e.g., 12% APR). A factor rate is a one-time multiplier applied upfront (e.g., 1.4x), regardless of repayment speed. Factor rates often hide the true annualized cost, which can exceed 100% APR.
Do I need collateral to get funding from 8fig?
No. 8fig funding is unsecured and based on your ecommerce revenue performance, not personal assets or collateral. The platform analyzes your sales data, inventory turnover, and cash flow to determine eligibility and funding amount.
Can I use 8fig funding to pay off an existing MCA?
Yes. Many sellers use 8fig's flat-fee funding to refinance high-cost MCAs, eliminating daily deductions and reducing total interest costs. You'll need to confirm your current MCA balance and ensure 8fig's funding amount covers the payoff plus your working capital needs.
Your Move: Get the Funding You Need
You can't scale on hope and Hail Marys. You need funding that matches your cash conversion cycle, not one that drains your account every morning before your coffee's cold.
MCAs are financial fentanyl — fast relief, brutal hangover, and a cycle that's almost impossible to break. Factor rates sound simple until you realize you're paying triple-digit APR equivalent and losing 10-20% of every day's revenue.
8fig's flat fee model isn't perfect, but it's predictable.
You know what you're paying upfront.
You're not guessing at APR.
You're not hemorrhaging cash every time your processor settles.
If you're doing $100K+ and you're stuck in an MCA death loop, stop renewing.
Run the numbers. Compare what you're actually paying vs. what you think you're paying.
Then make the switch before your next inventory cycle eats another $10K in hidden costs.
Apply to 8fig or keep feeding the factor rate monster. Either way, the math doesn't lie.
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