Factor rate to APR: what your cash advance really costs
Sterling's take A factor rate tells you the price but not how fast you're paying it. Put the term in and the APR tells you both.
Estimated APR
125.9%
Very expensive.
- You receive
- $50,000
- You pay back
- $67,500
- Cost of the money
- $17,500
- Cost per $1 received
- $0.35
- 126 daily payments of
- $535.71
- Effective annual rate
- 251.1%
An estimate on the money you actually receive, with daily payments counted as 21 business days a month. Not an offer and not a lender's disclosure.
| Factor | 3 months | 6 months | 9 months | 12 months | 18 months |
|---|---|---|---|---|---|
| 1.10 | 76% | 38% | 26% | 19% | 13% |
| 1.15 | 113% | 57% | 38% | 29% | 19% |
| 1.20 | 149% | 75% | 50% | 38% | 25% |
| 1.25 | 183% | 92% | 62% | 46% | 31% |
| 1.30 | 217% | 109% | 73% | 55% | 37% |
| 1.35 | 250% | 126% | 84% | 63% | 42% |
| 1.40 | 283% | 142% | 95% | 71% | 48% |
| 1.45 | 314% | 158% | 106% | 79% | 53% |
| 1.50 | 346% | 174% | 116% | 87% | 58% |
Enter the advance, the factor rate and how it's repaid, and the calculator shows what you pay back, the cost of the money and the APR on what you actually receive. Use it on every advance offer before you sign, because two offers with the same factor rate can cost very different amounts per year.
What each input means
- Advance amount. The headline amount on the offer, before any fees.
- Factor rate. The fixed multiple you pay back. 1.35 means you repay $1.35 for every $1.00 advanced.
- Fixed term or % of takings. Choose fixed term if the provider debits a set amount daily or weekly. Choose % of takings if it keeps a share of your card sales, the holdback.
- Term and frequency (fixed term). How many months until it's repaid, and whether debits come daily or weekly.
- Monthly card sales and holdback (% of takings). What a typical month brings in, and the share the provider keeps.
- Up-front fees. Anything deducted before the money reaches you.
The method
- Payback = advance × factor rate.
- Number of payments = months × 21 for daily (business days), or months × 52 ÷ 12 for weekly, rounded to whole payments.
- Payment = payback ÷ number of payments.
- Amount received = advance − up-front fees.
- The calculator finds the periodic rate at which those payments are worth exactly the amount received, then multiplies by 252 (daily) or 52 (weekly). That is the APR: a nominal annual rate on the money you actually got.
- The effective annual rate compounds that periodic rate over a year, which is why it is higher.
In holdback mode, the term is estimated as payback ÷ (monthly card sales × holdback), and payments are treated as daily.
Worked example
$10,000 at a 1.35 factor over 6 months, paid daily: $13,500 back, 126 payments of $107.14, a cost of $3,500 and about 126% APR. Paid weekly instead, it is 26 payments of $519.23 and about 123% APR. Stretch the same factor to 12 months daily and the APR falls to about 63%, because you hold the money twice as long for the same cost.
Add a $500 up-front fee to the 6-month daily version and you receive $9,500, still repay $13,500, and the APR rises to about 149%.
Holdback mode: $100,000 at 1.35 with $150,000 of monthly card sales and a 15% holdback gives an estimated term of 6 months, so the APR lands at about 126% again.
Limitations
- Holdback terms are estimates. If sales fall, the term lengthens and the APR falls; if sales rise, the reverse.
- It assumes equal payments with no missed days, holidays or reconciliation adjustments.
- It doesn't include fees charged later, such as returned-payment or default fees.
- It is an estimate to compare offers, not a disclosure and not advice. See merchant cash advances for how the product works, and the offer checker if you have the total payback rather than a factor rate.
Ready for a straight answer?
Two minutes of questions. One funding specialist. No impact on your credit score.
Questions owners ask
Why is the APR so much higher than the factor rate suggests?
A factor rate of 1.35 looks like 35%, but you repay it over months, not a year, and you start repaying the next business day. Both push the annual rate up.
Is this APR the same as the one on a disclosure form?
It uses the same idea, an annual rate on the money you actually receive, but it is an estimate. A provider's own disclosure, where the law requires one, is the figure to rely on.
Why does the amount not change the APR?
Because every payment scales with the advance. $10,000 and $100,000 at the same factor rate and term have the same APR.
What should I enter for fees?
Anything taken off the advance before it reaches you: origination, underwriting, admin or broker fees. If you receive less than the advance, the difference is a fee.