Factor Rate
A decimal multiplier (like 1.30) applied to the funded amount to calculate total payback — it is not an interest rate or APR.
A factor rate is how many revenue-based products, including merchant cash advances, price an advance. Instead of an annual percentage rate that accrues over time, you get a single decimal — commonly written as something like 1.20 to 1.49 — that you multiply against the funded amount to get the fixed total payback.
The math is simple on purpose. If you are advanced $20,000 at a 1.30 factor rate, the total payback is $26,000 ($20,000 × 1.30). That $6,000 is the cost of the capital, and it does not grow if the term runs long, because a factor rate is fixed at signing rather than accrued daily like interest.
The trap is comparing a factor rate to an APR head-to-head — they are not the same thing and converting one to the other depends on the term. The number that actually matters for a decision is total dollars repaid and the weekly remittance against your real deposits, not the rate in isolation. Always confirm the factor rate, any fees, and the total payback in writing before you sign.
Frequently asked
Is a factor rate the same as an APR?
No. A factor rate is a fixed multiplier applied once to the funded amount, while an APR accrues over time. Converting a factor rate to an APR depends on the repayment term, so compare total payback instead of assuming they are equivalent.
How do I turn a factor rate into a dollar cost?
Multiply the funded amount by the factor rate to get total payback, then subtract the funded amount. On $20,000 at 1.30, total payback is $26,000 and the cost is $6,000, before any separate fees.
Does paying off early lower the factor-rate cost?
Not automatically. Because the factor rate is fixed at signing, early repayment only saves money if your agreement includes an early payoff discount. Ask before you sign.
Related terms
The base factor rate an underwriting desk assigns to a deal before any broker markup — the wholesale cost of the advance.
The full dollar amount you repay over the life of an advance — funded amount times the factor rate, plus any fees.
A reduction in total payback that some funders offer if you repay your advance ahead of schedule.
A purchase of future card sales repaid through a daily holdback on card batches — the classic fast-funding product.
Funding repaid as a set remittance tied to your revenue and cash flow rather than a fixed bank-style monthly loan payment.
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