Business finance glossary
Factor rate
A merchant cash advance pricing multiplier expressed as a decimal (e.g., 1.35) — not an annual percentage rate.
A factor rate is the pricing mechanism used in merchant cash advances (MCAs) and some short-term business loans. Instead of charging interest expressed as an APR, the lender multiplies the advance amount by the factor rate to determine the total repayment amount. A $50,000 advance at a 1.35 factor rate means total repayment of $67,500 — $17,500 in fees. Factor rates are not comparable to interest rates without converting: the equivalent APR depends heavily on the repayment speed. A 1.35 factor rate repaid over 6 months converts to roughly 70% APR; repaid over 12 months it's about 35% APR. Factor rates typically range from 1.10 to 1.50.