Purchased Amount | MCA Glossary

Definition

The total dollar amount a business agrees to repay to an MCA funder, calculated by multiplying the advance amount by the factor rate.

Explanation

The purchased amount is the contractual total repayment obligation in a merchant cash advance. Unlike a loan balance that decreases as interest accrues and principal is repaid, the purchased amount is fixed at origination — it is the product of the advance amount and the factor rate, determined the moment the agreement is signed. For example, an advance of $80,000 with a 1.35 factor rate creates a purchased amount of $108,000. This is the total dollar commitment, regardless of how quickly or slowly the advance is repaid. Whether repayment takes 5 months or 12 months, the funder collects $108,000 in total. Understanding the purchased amount is the most direct way to calculate the true cost of an MCA. The difference between the purchased amount and the advance amount — in this case, $28,000 — represents the total fee paid to the funder. This total fee, rather than a factor rate or daily payment amount, is the clearest cost metric for comparing MCA offers with different structures and terms.

Example

A $50,000 MCA with a 1.30 factor rate has a purchased amount of $65,000. The business will remit $65,000 in total through daily holdback payments — the $50,000 advance plus $15,000 in fees — before the advance is considered fully satisfied.

Why It Matters

The purchased amount tells you exactly how much money is leaving your business to service the MCA. Compare purchased amounts across offers to understand total cost before accepting any deal. A lower factor rate on a larger advance may result in a higher purchased amount than a higher factor rate on a smaller advance — purchased amount is the only metric that captures the full picture of what you owe.

Frequently asked questions

Is the purchased amount the same as the payback amount?

Yes, in most MCA agreements the purchased amount and the payback amount refer to the same figure: the total amount the funder is entitled to collect. Some agreements use one term, some use the other. Regardless of the label, this is the number that represents your total financial obligation — always identify and record this figure from any MCA agreement before signing.