Guide · What it costs
What factor rate should you expect on a merchant cash advance?
By Alex Makowski Updated
Commonly between 1.1 and 1.5. Stronger revenue, longer trading history and consistent deposits push toward the lower end. At 1.3, a $50,000 advance means repaying $65,000 in total. Anyone quoting a rate before reading your bank statements is guessing.
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01
What the rate means in dollars
A factor rate is a multiplier, not an interest rate. At 1.30 you repay 1.3 times what you receive — full stop, regardless of how long it takes.
$50,000 at 1.20 = $60,000 repaid. At 1.30 = $65,000. At 1.40 = $70,000.
That $10,000 spread between 1.20 and 1.40 is the whole reason to compare offers rather than take the first one.
| Factor rate | Total repaid | Cost | Business-day payment over about six months | Where it sits |
|---|---|---|---|---|
| 1.10 | $55,000 | $5,000 | About $437 | Bottom of the range: high, steady deposits and years of trading |
| 1.20 | $60,000 | $10,000 | About $476 | Lower end |
| 1.30 | $65,000 | $15,000 | About $516 | Middle of the range |
| 1.40 | $70,000 | $20,000 | About $556 | Upper end |
| 1.50 | $75,000 | $25,000 | About $595 | Top of the normal range: usually short trading history, uneven deposits or an existing advance |
Cost of $50,000, by product
02
What moves the number
Monthly deposit volume, and how steady it is. This is the single largest factor.
Time in business. Under a year pushes the rate up; three years or more pulls it down.
Industry. Some trades are priced higher because their default history is higher, regardless of how your own business is performing.
Existing advances. Stacking pushes the rate up sharply where it does not cause an outright decline.
Credit score, which matters far less here than on any other product but is not ignored entirely.
03
How to compare offers honestly
Compare the total dollar repayment. Not the factor rate, and definitely not the daily payment.
A lower daily payment over a longer term usually costs more in total. It is quoted precisely because it sounds smaller.
Ask every funder the same question: what is the total I repay, in dollars? Any hesitation is information.
Written by
Alex Makowski, Owner
Alex Makowski owns and runs Business Loans for America and has been placing funding for U.S. small businesses since 2021. Businesses he has worked with have secured $50M+ in financing across 1,200+ placements. He writes and reviews every guide on this site.
FAQ
Related questions.
- Is a 1.5 factor rate bad?
- It is the top of the normal range and usually reflects short trading history, uneven deposits, or an existing advance. It is not automatically predatory, but it is worth getting a second offer before accepting.
- What is a factor rate as an APR?
- Much higher than the factor suggests, because repayment happens over months rather than a year. A 1.3 repaid daily over nine months is about 73 percent APR, and over four months about 160. Compare on total dollars instead, which is the number you actually pay.
- Can I negotiate the factor rate?
- Sometimes, particularly with a competing offer in hand. Having two offers is worth more than any argument you can make with one.
Guides
More on what it costs
Can you save money by paying off a merchant cash advance early?
What does business funding actually cost, in dollars?
The APR behind a factor rate
A 1.3 factor repaid daily over four months is about 160 percent APR. Over eight months, about 80. Same fee, different speed.
The fees around the rate
An origination fee of a few percent, ACH and underwriting fees, and sometimes a broker fee. On a small advance they outweigh the factor.
The daily payment, computed
Total repayment divided by business days in the term. $65,000 over 126 days is $516 a day.
$50,000, four ways
$15,000 on an advance over six months, or $12,000 to $17,000 on equipment spread over five years. Same money, different jobs.
Sources
- Consumer Financial Protection BureauFederal consumer-finance regulator. Publishes guidance on credit terms and disclosure.
- Federal Trade CommissionEnforces against deceptive practices in small-business lending and marketing.
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