Banker's Guide to New Small Business Finance by Charles H. Green

Author:Charles H. Green [Green, Charles H.]
Language: eng
Format: epub
ISBN: 9781118940853
Published: 2014-08-25T00:00:00+00:00

Purchase price = $93,851 (sum that was offered to the business)

Specified sum = $127,637 (sum that would be recaptured by MCA)

Specified percentage = 16 percent (portion of proceeds remitted to MCA)

On the accompanying Merchant Processing Agreement that was a required part of the transaction, the document information disclosed that the average credit card volume for the business was $100,000 per month, with a high monthly volume in the previous 12 months of $140,000.

While these figures cannot disclose what the actual funding costs will be, since the exact recapture period is determined by future revenues, they can be used to project some possibilities. For starters, with an average volume of $100,000 per month, and 16 percent of that sum remitted to the MCA each month, the contract would be fulfilled in less than one year. But rounding up to the assumption that the company required a full year to generate sufficient revenues to pay it off, the return to the MCA would still be appealing.

The following equation illustrates the calculations on this scenario if a full year were provided to recapture the obligated proceeds.

ROI Calculation for Payment Over One Year

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