Purchased Amount: Meaning in a Merchant Cash Advance
The purchased amount is the total of your future sales that the funder buys, and it's what you'll deliver back over the life of the advance. It's the advance amount times the factor rate. On a $40,000 advance at a 1.35 factor, the purchased amount is $54,000. It doesn't grow with time and doesn't shrink if you pay faster, unless the funder agrees to a discount.
Where does it show up?
On the first page of most contracts, usually called the purchased amount or the receivables purchased amount. State disclosure forms call it the total repayment amount or the total amount to be paid.
How does the purchased amount relate to the factor rate?
Multiply the purchase price by the factor rate and you get the purchased amount, the total you repay. A larger purchased amount on the same purchase price means a higher cost, whatever the payment schedule looks like.
What does it look like in practice?
A contract says purchase price $40,000, purchased amount $54,000, specified percentage 12%. The $14,000 gap is the funder's fee. If fees are also taken out of the $40,000, your real cost per dollar is higher. Check it with the factor rate calculator.
Which owner question goes with this term?
How long does an MCA last? Answers to the questions owners ask about this term, with what to ask the funder.
A term on your offer you don't recognize?
Send us the line and we'll tell you what it means. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.