What does a factor rate cost in dollars and APR?
Owners and brokers: turn one MCA offer into dollars and an APR.
A factor rate calculator turns a merchant cash advance offer into dollars. Multiply the advance by the factor rate to get the total payback. Subtract the cash you actually receive, then add any fees paid on the side. That is your dollar cost. The tool also shows it per dollar received, as a simple yearly cost, and as an estimated APR.
By the Afterfirst Editorial Team · Updated
Calculator
Enter your numbers to see results.
Results are estimates. Funders set the actual terms, and every offer is subject to funder underwriting. Nothing you type is stored or sent; the page address holds your numbers so you can share them.
What you enter
Every box is your input. Nothing is filled in for you, because offers differ too much for a starting number to mean anything.
- Advance amount (purchase price): the amount the offer says is being advanced.
- Factor rate: the multiplier on the offer, for example 1.3 is written as 1.3.
- Fees taken out of the funding: fees the funder deducts before the money reaches your account. Leave blank if none.
- Fees you pay separately: fees paid on the side, not taken from the funding. Leave blank if none.
- Payment schedule: daily (business days) or weekly, and how many days a week the funder debits.
- Payment amount or number of payments: enter one. The tool works out the other.
The formulas
Each result uses one plain formula. A is the advance amount, F the factor rate, D the fees taken out of the funding, O the fees paid separately, P the payment and N the number of payments.
- Total payback: T = A x F
- Cash you receive: R = A - D
- Dollar cost: C = T - R + O
- Cost per dollar received: C / R
- Number of payments: N = T / P, or payment: P = T / N
- Term in calendar days: daily schedule, N / (debit days per week) x 7; weekly schedule, N x 7
- Simple annualized cost: (C / R) x (365 / term in days)
- Estimated APR: find the rate r per payment period where R - O equals the sum, for k = 1 to N, of P / (1 + r)^k. Then nominal APR = r x periods per year, and effective annual rate = (1 + r)^(periods per year) - 1. Periods per year are debit days per week x 52 for a daily schedule, or 52 for a weekly one.
The APR step has no closed form, so the tool narrows r down by halving the search range until the two sides match to the cent. If N is not a whole number, the last payment is the smaller remainder.
Worked example
Round numbers picked so the math is easy to check by hand. They are not typical terms and not a quote. An advance of $50,000 at a factor rate of 1.35, with $1,500 in fees taken out of the funding, no separate fees, and 120 daily payments on a 5-day debit week.
- T = 50,000 x 1.35 = $67,500.00
- R = 50,000 - 1,500 = $48,500.00
- C = 67,500 - 48,500 + 0 = $19,000.00
- Cost per dollar received = 19,000 / 48,500 = $0.39
- P = 67,500 / 120 = $562.50
- Term = 120 / 5 x 7 = 168 calendar days
- Simple annualized cost = 0.3918 x (365 / 168) = 85.1%
- Estimated APR: r = 0.5812% per payment, so nominal APR = 0.5812% x 260 = 151.1%, and effective annual rate = (1 + 0.005812)^260 - 1 = 351.3%
Why a disclosure may show a different APR
State disclosure laws set their own estimated APR method, so an offer's disclosure can differ from this estimate. California's commercial financing disclosure rules are one example. Texas Finance Code chapter 398 covers commercial sales-based financing in Texas. Read the disclosure that comes with the offer, and ask the funder how it was worked out. To compare several offers side by side, use compare offers. For the terms, see the MCA glossary.
FAQ
Is a factor rate the same as an interest rate?
No. A factor rate is a fixed multiplier on the advance, set once. The dollar cost does not shrink if you pay sooner, unless the contract offers an early payoff discount. That is why the tool turns it into dollars first.
Why do the simple annualized cost and the estimated APR differ?
The simple figure spreads the cost evenly over the whole term. The APR estimate counts each payment when it leaves your account. Money you pay back early is money you had for less time, so the APR estimate is usually higher.
Does using the calculator affect my credit?
It runs only in your browser. Nothing you type is stored or sent, and no one sees it. The page address holds your numbers so you can share them if you choose.
Can I use it for an advance I already have?
Yes. Enter the numbers from your contract. For more than one open advance, the stacked payment calculator adds every debit together.
Next step
Have an offer to test against others? Call 877-FUND-654Email info@afterfirstmca.com, and we shop your file to funders whose programs fit. Each funder whose box fits sends its own terms in writing. Afterfirst does not set prices.A person replies within one business day.
Call 877-FUND-654Send one file.
See what fits.
Start a merchant cash advance application, or write to the desk. Afterfirst MCA is not a lender.
Or write to the desk at info@afterfirstmca.com
A person replies within one business day.