What is a factor rate?

Quick Answer

A factor rate is a decimal multiplier (typically 1.10-1.49) used in MCAs and short-term business loans instead of APR. Multiply the loan amount by the factor rate to get total payback. Example: $50,000 at 1.30 factor = $65,000 total payback ($15,000 fee), regardless of how fast you repay.

Key Details

Factor 1.10 = 10% total cost
Factor 1.30 = 30% total cost
Factor 1.49 = 49% total cost (predatory range)
Equivalent APR depends on term length
6-month 1.30 ≈ 60% APR
12-month 1.30 ≈ 30% APR

Answer by David Chen — Senior Business Funding Editor

12+ years in alternative lending. $200M+ underwritten.

Key Details

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