RTI (Recovery Time Indicator)
Recovery Time Indicator (RTI) is the expected time period for a merchant to repay an MCA — calculated as advance amount × factor rate ÷ daily/weekly payment — providing the implied term length that determines true effective cost of capital.
Why This Matters
RTI is the most useful conceptual handle on MCA pricing because it converts the abstract factor rate into a concrete time-to-repayment estimate. A $50K advance at 1.30 factor rate with $500 daily payment has RTI of $65,000 ÷ $500 = 130 business days, or roughly 6 months. Merchants thinking in monthly bank-loan terms often misunderstand factor-rate pricing without RTI translation. RTI also enables APR-equivalent cost calculation: shorter RTI means higher effective annualized cost despite identical factor rate. Top reps use RTI explicitly in pricing conversations to clarify true cost.
Frequently Asked Questions
Frequently Asked Questions
How does RTI affect effective cost of MCA?
Shorter RTI dramatically increases APR-equivalent cost. A 1.30 factor at 90-day RTI is roughly 120% APR-equivalent; the same 1.30 factor at 180-day RTI is roughly 60% APR-equivalent. Merchants should understand that faster repayment means higher annualized cost, not lower.
Can merchants negotiate longer RTI to reduce effective cost?
Sometimes — by negotiating lower holdback percentages (slower repayment per revenue dollar) or smaller fixed daily payments. Most funders price these adjustments through factor-rate or fee adjustments, so merchants pay for the longer RTI through other levers.