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Factor rate calculator

Type in any offer. See what it really costs, and what it would look like as an estimated APR so you can compare it to a loan or a line of credit.

1.051.60
Payback = advance × factor. 1.25 means you pay back $1.25 for every $1.00 advanced.
Often deducted from the advance before you receive it.
4104
Daily-payment products: use the number of weeks the daily payments run.
Total payback$25,000
Fee deducted$400
Net you actually receive$19,600
Total dollar cost$5,400
Weekly payment$962
≈ Daily (5-day week)$192
Estimated APR
nominal, weekly rate × 5298%
Simple annualized cost
cost ÷ net × (52 ÷ weeks)55%
Educational estimate only. Not a quote or a statutory disclosure.

Why a factor rate is not an APR

A factor rate is a plain multiplier on the amount advanced: 1.25 × $20,000 = $25,000 to pay back. It does not care how long you take. An APR (annual percentage rate) expresses cost per year on the balance you still owe. Because an advance is repaid in equal installments, your average outstanding balance is roughly half the starting amount, so the same dollar cost over a short term produces a much higher APR than the factor rate suggests.

In the default example above, a "25% factor" costs $5,400 on $19,600 actually received over 26 weeks. As a nominal APR (the weekly internal rate of return multiplied by 52), that is about 98%. Compounded, the effective annual rate is higher still, around 165%.

Assumptions we use. Fee deducted up front, equal payments at the end of each week, no early-payoff discount, no missed payments. Some states require commercial-financing disclosures computed under their own rules, and a provider's statutory APR figure may differ from this estimate. Use ours to compare offers, not as the legal number.

How to compare an advance against a loan or line of credit

QuestionAdvance (factor rate)Term loanLine of credit
How is cost quoted?Factor rate (e.g. 1.25) + feesInterest rate / APR + feesInterest on drawn balance + fees
Does paying early save money?Only if the contract has a prepayment discountUsually yes (check for prepayment penalties)Yes: interest stops when you repay
Payment frequencyDaily or weekly, fixedMonthly, fixedMonthly minimums, flexible
Best comparison numberEstimated APR from this calculatorStated APRAPR plus draw and maintenance fees

Three things the calculator can't see

  • Reconciliation clauses. Some receivables-purchase contracts let you adjust payments if revenue drops. That can change the real term and the real APR.
  • Stacking. A second or third advance makes each one more expensive than its own numbers show because they compete for the same cash flow.
  • Renewal offers. Renewing before payoff often means paying the factor rate again on money you have already paid for. More on how advances really work.

Frequently asked

What is a "good" factor rate?
There is no universal answer, because a low factor over a very short term can still be a very high APR. Compare the estimated APR and the total dollar cost, and ask what the payments do to your weekly cash flow.
Why does a shorter term make the APR higher?
Because the same fee is charged for the use of money for less time. Paying $5,000 to use $19,600 for six months costs more per year than paying it to use the money for twelve.
Are daily payments worse than weekly?
Not by themselves; the total cost is the same if the term is the same. Daily payments are just more sensitive to slow days and can trigger insufficient-funds fees if your balance runs low.

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