Factor rate vs APR

A factor rate is the multiplier that sets the total a merchant repays: a $50,000 advance at a 1.30 factor rate repays $65,000, a cost of $15,000. Factor rates commonly sit somewhere between about 1.1 and 1.5. They look small because they ignore time. The same $15,000 cost means something very different when it is remitted over twelve months than over four, because the merchant has the money for less time.

Annual percentage rate (APR) puts that cost on a per-year basis, which is the comparison borrowers expect from every other financing product. Because MCA remittances usually depend on daily or weekly sales, the term is an estimate, so the APR is an estimate too; a short estimated term can turn a modest-looking factor rate into a triple-digit APR. California's commercial-financing disclosure law (SB 1235) and New York's Commercial Finance Disclosure Law both require an estimated APR for sales-based financing, alongside the total cost, payment amounts, and prepayment terms.

For search, honest cost content is unusually valuable. "Factor rate vs APR" and "how much does an MCA really cost" are high-intent questions, and a page that walks through a worked example, links to the state disclosure rules, and shows its math is the kind of source both people and AI engines cite. A page that hides the APR invites the opposite conclusion.