Glossary
What is Factor Rate?
A factor rate is a decimal multiplier used to price some short-term financing, such as merchant cash advances. You multiply the amount financed by the factor rate to find the total repayment. Unlike interest, the charge is fixed up front and usually does not decrease if you repay early, unless the agreement offers an early payoff discount. A factor rate is not the same as an interest rate, and its annualized cost can be much higher, especially on short terms.
Example
A $40,000 advance with a 1.25 factor rate requires repaying $50,000.
Related funding
Working Capital: Keep payroll, inventory and operations moving.
Related terms
Questions about an offer? Your advisor will explain every term.