Factor rate to APR calculator
A factor rate to APR calculator converts a merchant cash advance offer into total cost, daily remit and an APR-equivalent so you can compare it against a term loan.
MCA / Factor Rate Calculator
Convert a factor rate offer to total cost, daily remit, and approximate APR. Useful for comparing MCA offers against term loan APRs.
Methodology
Total payback = principal × factor. APR-equivalent ≈ (factor − 1) × (365 / term days). This is an approximation — true APR is slightly higher because daily remittances reduce balance over time. APR is defined per the federal Truth in Lending Act (12 CFR § 1026, Regulation Z). MCAs are typically structured as a purchase of receivables and not subject to TILA APR disclosure, but several states (CA SB 1235, NY S5470) require commercial financing disclosures with an APR-equivalent.
Compare Two Offers (APR-equivalent)
Paste any two offers — MCA, term loan, line of credit — and normalize them to the same yardstick.
Lowest APR-equivalent wins on cost. Cents-on-the-dollar (CoD) shows total cost per dollar borrowed regardless of term length.
Why the conversion matters
Two offers can look nearly identical on the offer sheet and differ by more than 40 points of APR-equivalent once the term is factored in. Because an advance is priced as a flat multiple of the amount funded, a short term concentrates the same dollar cost into far fewer days, which is exactly where expensive money hides.
Once you have an APR-equivalent, run it through the loan payment calculator to see what an amortized loan at that rate would cost, and use the qualification estimator to check whether you already qualify for the cheaper product. Details on each option live on the funding products pages, the glossary defines every term on your agreement, and how it works walks through the process end to end.
The Consumer Financial Protection Bureau explains small business lending disclosures, and several states now require an APR-equivalent disclosure on commercial financing — worth requesting even where it is not mandated.
Frequently asked questions
What is a factor rate?
A factor rate is a flat multiplier applied to the advance amount. A $100,000 advance at a 1.30 factor means $130,000 is repaid in total, regardless of how quickly you repay. Unlike interest, it does not amortize down as the balance falls.
How do I convert a factor rate to an APR?
Approximate APR equals (factor − 1) × (365 ÷ term in days) × 100. A 1.30 factor repaid over 180 days is roughly a 60 percent APR-equivalent. It is an approximation because daily remits repay principal continuously, which pushes the true APR higher than the simple version.
Is a 1.2 factor rate good?
It depends entirely on the term. A 1.20 factor over 12 months is roughly 20 percent APR-equivalent; the same 1.20 over 4 months is roughly 60 percent. Never judge a factor rate without the term next to it.
Does paying an MCA off early save money?
Usually not by default. The total payback is fixed at signing, so early repayment shortens the term without reducing the dollars owed, which raises the effective APR. Some funding providers offer an early-payoff discount, but it must be written into the agreement.
What is cents on the dollar?
Cents on the dollar (CoD) is the total cost per dollar borrowed. A 1.30 factor is 30 cents on the dollar. It is a quick cost comparison but, like the factor itself, it ignores term, so pair it with the APR-equivalent.
Why do funding providers quote factor rates instead of APR?
Revenue-based advances are legally purchases of future receivables rather than loans, so they are priced as a flat multiple rather than an annualized interest rate. Converting to an APR-equivalent is the only way to compare an advance against a term loan.
How do I compare two offers fairly?
Normalize both to the same yardstick: total dollar payback, cents on the dollar, and APR-equivalent over the actual term. The comparison tool on this page does all three side by side so the cheaper offer is obvious.
Last reviewed: by the Simply Approved Business Loans editorial team.
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