Factor Rate to APR Calculator
Short answer: Multiply your advance by the factor rate to get total payback, then annualize over the real term — a 1.25 factor on a 6-month advance is not “25% interest,” it’s roughly a 90% effective APR because of daily payments on a non-amortizing balance. Run your own numbers below before you sign anything.
Estimate your monthly payment and total cost — or convert a merchant cash advance factor rate into the true APR so you can compare offers honestly.
Estimate only, based on standard amortization. Actual payments depend on the funder and your terms.
Estimated APR via the payment schedule (IRR). A factor rate is a flat multiplier, so the same factor costs far more when repaid quickly. Estimate only — confirm exact terms with an advisor.
What is a factor rate — and why it's not an interest rate
Merchant cash advances and some revenue-based funding aren't quoted as an interest rate. They use a factor rate — a flat multiplier on the amount advanced. Borrow $50,000 at a 1.4 factor and you repay $70,000, no matter how fast you pay it back. Because the multiplier doesn't change with time, a factor that looks small can translate into a very high APR once you account for daily or weekly repayment over just a few months.
Why APR is the number that matters
APR normalizes cost to a yearly figure, so you can compare a merchant cash advance against an SBA loan, a line of credit, or a working capital loan on equal footing. As a reference, SBA 7(a) and SBA Express run about 10.5%–14.5%, equipment financing 6%–18%, and working capital loans 8%–30% — while a factor-rate advance can land well above all of them.
Get a real comparison
Fundmerica is a business financing marketplace, not a lender. One application matches you against 75+ banks, SBA lenders, credit unions, and alternative funders with a soft credit pull — so you can see lower-cost options side by side instead of accepting the first factor-rate offer in front of you.
Frequently Asked Questions
What is a factor rate?
A factor rate is how merchant cash advances and some revenue-based funding are priced. Instead of an interest rate, you multiply the amount advanced by the factor (e.g., $50,000 × 1.4 = $70,000 total payback). Because it's a flat multiplier, it hides the true annualized cost — which is why this tool converts it to an APR.
Why is a factor rate's APR higher than the factor suggests?
Because you repay the full fixed payback amount quickly — often daily or weekly over a few months — the effective APR is far higher than the factor implies. The factor alone doesn't account for how fast you repay.
Are these calculations exact?
They're estimates for comparison. Actual offers depend on the funder, your business, and the exact payment schedule. Use the numbers to compare options, then confirm real terms with a funding advisor.
What's a typical business loan APR?
It varies by product: SBA 7(a) and SBA Express run about 10.5%–14.5%, equipment financing 6%–18%, lines of credit 8%–24%, and working capital loans 8%–30%. Merchant cash advances, expressed as factor rates, often work out to much higher APRs.
How do I get a lower-cost offer?
Compare. Fundmerica is a business financing marketplace that matches one application against 75+ funding sources with a soft credit pull, so you can see lower-cost options side by side instead of accepting the first factor-rate offer you're shown.
See real offers — no factor-rate surprises
Compare funding from 75+ sources in one application. Soft credit pull only. No obligation.
Apply NowFactor Rate vs. Interest Rate
An interest rate charges you on the balance you still owe — pay it down, pay less. A factor rate fixes the total cost on day one: $50,000 × 1.25 = $62,500 back, whether you repay in month two or month six. Funders quote factor rates because the number looks small; the only honest comparison is converting both to total dollar cost and effective APR.
A Worked Example
| Quote | $50K at 1.25, 6-month term |
|---|---|
| Total payback | $62,500 |
| Cost of capital | $12,500 |
| Simple annualized rate | ~50% |
| Effective APR (daily payments) | ~85-95% |
The gap between the last two rows is why converting matters: with daily or weekly payments you never hold the full $50K for the full term, so the money you actually have access to costs more per dollar-day. An early-payoff discount, if offered, changes this math — ask for it in writing.
When a Factor-Rate Product Still Makes Sense
Speed and accessibility. Revenue-based funding and merchant cash advances fund same-day on bank deposits, with no collateral and forgiving credit requirements. If the capital captures time-sensitive profit — inventory at a discount, a contract mobilization, a season you cannot miss — the math can work. If cheaper capital fits your timeline, compare a line of credit, term loan, or SBA loan first.
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Frequently Asked Questions
What is a factor rate?
A factor rate is a flat multiplier used to price merchant cash advances and revenue-based funding. Borrow $50,000 at a 1.25 factor rate and you repay $62,500 total. Unlike interest, the cost is fixed up front and does not decline as you pay the balance down.
How do I convert a factor rate to APR?
Multiply the amount by the factor rate to get total payback, then annualize the cost over the actual term. Because payments are usually daily or weekly, the effective APR is roughly 1.8-2x the simple annualized rate — a 1.25 factor over 6 months is about 50% simple annualized but an effective APR closer to 90%. The calculator on this page does the math for any quote.
What is the difference between a factor rate and an interest rate?
Interest accrues on your remaining balance, so paying early saves money. A factor rate is a fixed fee — the total cost is set on day one no matter how fast you repay, unless the funder offers an early-payoff discount. That is why two offers with similar-sounding numbers can have very different real costs.
Is a higher-APR product ever the right choice?
Sometimes. If $40K today lets you take a contract that nets $30K in 90 days, an expensive 6-month advance can be rational. The mistake is not knowing the real cost — convert every quote to APR and total dollar cost before signing.
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