Quick answer: A factor rate is a multiplier. Advance amount × factor rate = simple total payback before separate fees.
Key takeaways
- MCA structures vary by provider and contract.
- Revenue, bank activity and existing obligations matter.
- Compare total payback and payment timing, not just approval amount.
- Approval, pricing and funding speed are not guaranteed.
Factor rate
A factor rate is a multiplier. Advance amount × factor rate = simple total payback before separate fees.
Total dollars matter
Compare exact net proceeds, total dollars expected back, fees, frequency and estimated duration.
Why factor rate is not APR
A factor rate is not a declining-balance interest rate. Annualized comparisons require duration and payment timing.
Payment frequency
Daily or weekly withdrawals can create different cash-flow pressure even when total payback is similar.
Fees and net proceeds
Origination or administrative fees can reduce the cash that actually reaches the business.
Early payoff and renewal
Early-payoff discounts or renewal pricing are contract-specific and should be confirmed in writing.
Simple illustration:
$50,000 × 1.35 = $67,500 simple total payback before separate fees. This is educational only.
Questions to ask before moving forward
- What is the exact net amount deposited?
- What is the exact total payback?
- How often is money withdrawn?
- What happens if revenue falls?
- What are payoff, UCC and default terms?
Source standards: See our Sources & Standards page. Actual provider agreements and current law control individual transactions.