How to calculate cost with a factor rate
Multiply the funded amount by the factor rate to get total payback. Subtract the funded amount to get the cost of capital.
- $50,000 × 1.20 = $60,000 payback ($10,000 cost)
- $50,000 × 1.35 = $67,500 payback ($17,500 cost)
Factor rate vs interest rate
An interest rate is applied to the remaining balance over time. A factor rate is applied once to the original amount. A 1.20 factor rate is not equivalent to 20% APR — repaid over 6 months it equates to an APR well above 60%.
What affects your factor rate
Providers price based on risk: time in business, monthly revenue, average daily balance, NSFs, credit score, industry, and how many advances are already open.
Frequently asked questions
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