pricing
Factor Rate
A factor rate is a decimal multiplier (e.g. 1.25) applied to a funded amount to express total repayment, instead of an interest rate.
Definition
What it means.
Factor rates are common in revenue-based funding and business cash advances. If you receive $50,000 at a 1.30 factor rate, you repay $65,000 total, the factor is multiplied by the advance, not compounded like an APR. The total cost is fixed at origination and does not change if you pay faster.
Because factor rates do not compound, the effective APR depends on the repayment window. A 1.30 factor paid over 12 months behaves very differently from a 1.30 factor paid over 4 months, the shorter the term, the higher the effective APR. Always convert factor to APR before comparing a revenue-based product to a term loan.
Example
$50,000 advance × 1.30 factor = $65,000 total repayment. Over 10 months of daily ACH, that is an effective APR of roughly 55%.
Now what?
Get an offer that accounts for factor rate.
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