Factor Rate Calculator
This factor rate calculator turns a merchant cash advance factor rate into the real dollars you repay and the effective APR behind it. A factor rate is a decimal, like 1.4, that you multiply by your advance to get total payback. It is not an interest rate, so it hides the true yearly cost. Enter your advance amount, factor rate, and term below to see what the deal actually costs.
This tool sits under our merchant cash advance hub. To compare the same offer against a bank loan, also try our merchant cash advance payoff calculator.
How it's calculated
A factor rate calculator multiplies your advance by the factor rate to find total payback, then works backward to an effective APR. The math is simple. Total payback equals advance times factor rate. Your cost is the payback minus the advance. To find the effective APR, the tool spreads that cost across your real payment schedule, since MCAs pull money daily or weekly. That schedule is why a small-looking factor rate becomes a very large APR.
The key lesson: a 1.4 factor rate is roughly a 95% APR. The factor rate is not interest. Two offers with the same factor rate can carry very different APRs if one has a shorter term, because you pay the same fee back faster. Always convert the factor rate to an APR before you sign.
A worked example
Say you take a $100,000 advance at a 1.4 factor rate over a 9-month term with daily payments. Total payback is $100,000 times 1.4, or $140,000.
Your cost is $40,000. On a daily schedule that is about $740.74 per day, roughly $15,555.56 per month, across about 189 payments.
Spread over the real payoff timeline, the effective APR lands near 95%. That is why a 1.4 factor rate should never be read as 40%.
Common mistakes to avoid
- Treating a 1.4 factor rate like 40% interest. A 1.4 factor rate on a 9-month term is closer to a 95% effective APR.
- Ignoring the term length. A shorter term with the same factor rate means a higher APR, because you repay the fee faster.
- Forgetting daily or weekly payments drain cash flow long before the term technically ends.
- Comparing an MCA factor rate directly to a bank loan interest rate without converting both to APR first.
- Assuming the factor rate is negotiable after signing. It is fixed, so shop and compare before you commit.
Frequently asked questions
What does a factor rate calculator do?
A factor rate calculator converts a merchant cash advance factor rate into total payback dollars and an effective APR. You enter your advance, factor rate, and term, and it shows the real cost so you can compare offers fairly.
Is a factor rate the same as an interest rate?
No. A factor rate is a flat multiplier, not an interest rate. A 1.4 factor rate on a $100,000 advance means you repay $140,000 total, no matter how fast you pay. On a 9-month term that works out to about a 95% effective APR.
How do I convert a factor rate to an APR?
Multiply the advance by the factor rate to get payback, subtract the advance to find the cost, then spread that cost across your real daily or weekly payment schedule. Our calculator does this for you. A 1.4 factor rate over 9 months is roughly a 95% APR.
Why is the APR so much higher than the factor rate?
Because you repay the full fee quickly. A factor rate charges the same dollar cost whether the term is 6 months or 12. Squeezing that cost into a short term through daily payments pushes the effective APR far above what the factor rate suggests.
Does the factor rate change if I pay early?
Usually no. With most merchant cash advances you owe the full factor rate times advance no matter when you pay. Ask your provider directly whether the contract offers a prepayment discount before you plan to pay early.
Sources
We prioritize primary sources for rules, formulas, rates, limits, and definitions. See our calculator methodology and editorial policy.
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