Factor rate to APR calculator

A factor rate is a multiplier used to price merchant cash advances and some short-term business loans. Multiply the amount you receive by the factor rate to get the total you’ll repay. An advance of $10,000 at a factor rate of 1.15 means repaying $11,500, so the cost is $1,500.

A factor rate of 1.15 looks like 15%, but it isn’t comparable with an APR. The whole cost is fixed upfront and doesn’t shrink as you repay, and repayment often happens over months rather than years, with payments taken daily or weekly. The shorter the term and the more often you pay, the higher the equivalent APR.

Paying early often doesn’t save money with a factor rate, unless the agreement offers a discount for it. Ask before you sign.

The calculator splits the total repaid into equal payments at the frequency you choose (252 business days, 52 weeks or 12 months a year), then finds the periodic rate at which those payments are worth exactly the amount you received. Multiplying that rate by the number of payments a year gives the estimated APR. Real agreements may have fees, holdbacks based on sales, or uneven payments, so treat the result as an estimate.

The federal Truth in Lending Act doesn’t cover business financing, so providers don’t have to show you an APR everywhere. California and New York require many commercial financing providers to disclose costs, including an estimated APR, when they make an offer, and several other states require other cost disclosures. Wherever you are, ask for the total repaid and every fee in writing, then use this calculator.

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