Factor Rate & MCA Cost Calculator
Merchant cash advances quote a factor rate, not an interest rate — and the two are not comparable. Enter your advance, factor rate, and term to see the total payback, the real dollar cost, and an estimated APR so you know exactly what the money costs.
How the factor rate calculator works
Merchant cash advances (MCAs) and many short-term funders price money with a factor rate — a simple multiplier such as 1.2, 1.3, or 1.4. Unlike interest, it does not accrue over time and it does not fall if you pay early. You agree at funding to repay the advance multiplied by the factor, full stop.
Total cost = Payback − Advance. Cents on the dollar = Factor − 1. Estimated APR ≈ (Total cost ÷ Advance) ÷ (Months ÷ 12) × 100.
The calculator runs those formulas instantly. If you take a $50,000 advance at a 1.3 factor, the total payback is $65,000, the cost of capital is $15,000, and you are paying 30 cents for every dollar borrowed. Spread that $15,000 cost over a 12-month term and the estimated APR lands near 30%. Cut the term in half and the same dollar cost is squeezed into six months, so the effective annual rate roughly doubles — which is why MCA terms and payback speed matter so much.
The estimated APR here is deliberately labeled an approximation. A precise APR would account for the exact daily or weekly remittance schedule and the declining time value of each payment. Because MCAs debit frequently and repay fast, real APRs often run well above the simple estimate shown. Use this number to sense the order of magnitude and to compare offers, not as a disclosed legal rate.
What drives the cost
- Factor rate — the whole cost is baked in here; even 0.05 higher adds thousands on a large advance.
- Term length — a shorter payback window raises the effective APR sharply for the same factor.
- Advance size — scales the dollar cost proportionally but not the rate.
- Remittance frequency — daily debits repay faster than the term implies, pushing the true APR higher.
Before you sign an MCA
- Convert the factor to dollars and to an estimated APR so you can compare against real loans.
- Ask whether there is any early-payoff discount — most MCAs offer none.
- Confirm the debit frequency and amount against your cash flow.
- Shop a term loan or line of credit first; MCAs should be a last resort.
Frequently asked questions
What is a factor rate?
A factor rate is a multiplier used by merchant cash advance and some short-term funders instead of an interest rate. You multiply the advance by the factor rate to get the total you must repay. A 1.3 factor on a $50,000 advance means you repay $65,000.
How do I convert a factor rate to an APR?
There is no exact conversion because factor-rate financing has no compounding, but you can approximate. Divide the total cost by the advance to get the cost as a percentage, then divide by the term in years. A 1.3 factor repaid in one year is roughly a 30% estimated APR, but shorter terms push the true APR far higher.
Why are merchant cash advances so expensive?
The fixed cost from the factor rate is charged no matter how quickly you repay, and repayment terms are often just a few months. That compresses a large fee into a short window, which translates into a very high effective annual cost compared with a traditional loan.
Is a factor rate the same as an interest rate?
No. An interest rate accrues over time on the remaining balance, so paying early saves money. A factor rate is a fixed multiplier set at funding, so the total cost does not shrink if you repay early. Never compare a factor rate directly against an interest rate.
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This calculator is for educational and informational purposes only and does not constitute financial, legal, or lending advice. The estimated APR is a simplified approximation and does not reflect the exact remittance schedule of a merchant cash advance; the true annual cost is often higher. Confirm all terms with the funder before making decisions.