Merchant Cash Advance Calculator: Factor Rate to APR

A factor rate is a multiplier, not a rate. A 1.30 factor on $50,000 means you repay $65,000. That is the whole quote. Notice what is missing: when. Interest has time built into its definition, so 12 percent means 12 percent per year. A factor means nothing per anything. It is a flat markup with the clock removed.

The Federal Reserve Board's review of online lender websites found one funder advertising factor rates "usually between 1.14 and 1.48" and another quoting rates "as low as 1.15". The Federal Trade Commission puts the same thing the other way round: the business repays the advanced amount plus a "factor", "often between 20% to 50% of that amount." Call it 1.15 to 1.50 and you have covered most of the market.

Because the markup is fixed, the only thing deciding what the money costs per year is how fast it comes back. The Fed's own illustration is $50,000 of capital in exchange for $65,000 of future receipts, collected as 10 percent of daily credit card sales. On $100,000 a month of card volume that clears in about 137 banking days, and by the actuarial method it is about 101 percent APR before fees. Stretch the identical $65,000 over eighteen months and it is about 37 percent. Same factor, two different products.

The holdback, which New York's rule calls the split rate, is the share of each day's card settlement the funder takes before the money reaches you. On $100,000 a month of card volume across roughly 21 banking days, a 10 percent holdback is about $476 a day. Raise it to 20 percent and the same $65,000 clears in about 69 banking days instead of 137. The dollars did not change, but the APR went from about 111 percent to about 221 percent, because you had the money for half as long. Negotiate the holdback before the factor.

Many advances are not a percentage at all: they debit a flat daily or weekly amount by ACH and reconcile afterwards, or never. The FTC flagged that some providers "may fail to conduct promised 'true-ups' or 'reconciliations' to lower merchants' daily payment amounts to reflect drops in their sales," and said failing to adjust when sales fall "would be concerning, and potentially unlawful." If your payment does not drop when January is bad, you carry all of the volume risk.

PayPal Working Capital requires that "you must pay at least 5% or 10% of your total loan amount (loan + the fixed fee) every 90 days," the 5 percent applying to loans estimated at twelve months or more. Shopify Capital sets minimums of "30% of the total loan by the 6-month mark and 60% of the total payment amount by the 12-month mark" inside an eighteen month maximum. Stripe is the instructive contrast: its US loans carry minimum payments, typically on a 30 or 60 day basis, with shortfalls debited from your bank account, while its US merchant cash advance says that "unlike a loan, you don't have a fixed payment schedule or periodic debits." A published floor caps how slowly you repay. A true advance has none.

The Truth in Lending Act does not reach this product. Regulation Z exempts "an extension of credit primarily for a business, commercial or agricultural purpose" and "an extension of credit to other than a natural person." No APR box is federally required on any business financing, so a five figure funding offer can carry less cost disclosure than a store credit card. Funders argue it is not credit at all: Stripe describes its US merchant cash advance as YouLend's purchase of future receivables that "isn't a loan or a credit transaction."

States filled the gap. California's SB 1235 and the DFPI regulations effective December 9, 2022 require a disclosure table carrying an "Estimated Annual Percentage Rate" row, with the mandated sentence "APR is not an interest rate. The cost of this financing is based upon fees charged by [financer] rather than interest that accrues over time." The industry sued and lost twice: summary judgment for the DFPI on December 4, 2023, affirmed by the Ninth Circuit on April 15, 2025 in Small Business Finance Association v. Mohseni. SB 362, chaptered October 6, 2025 and effective January 1, 2026, then barred using "interest" or "rate" deceptively.

New York's 23 NYCRR Part 600, certified January 12, 2023, covers commercial financing of $2,500,000 or less. Its rate must be "determined in accordance with either the United States Rule method or the actuarial method, as both are set forth in Appendix J, 12 C.F.R. Part 1026," shown to the nearest two decimal points. That is Truth in Lending math applied to a product Truth in Lending does not cover. A provider using the historical method fixes a look back window of "no less than four months and no more than twelve months" of sales. Connecticut, Florida, Georgia, Kansas, Missouri, Texas, Utah and Virginia have their own versions. Outside those ten states, nobody has to give you an APR.

Around the halfway mark a broker will offer to renew you: more capital, one simple payment. New York wrote the clearest definition of the mechanic underneath by forcing funders to ask it on the disclosure form: "Does the renewal financing include any amount that is used to pay unpaid finance charges or fees, also known as double dipping?" Where the old deal carried a fixed finance fee, the rule makes the funder compute the answer pro rata against how much of the previous financing has been repaid.

Put numbers on it: $50,000 at a 1.30 factor. Total repayment $65,000, of which $15,000 is the funder's charge. You are halfway through: you have paid $32,500 and you owe $32,500. Because the charge was fixed at the start rather than accrued over time, $7,500 of that payoff figure is finance charge you have not used yet. Renew, let the new advance retire the old balance, and that $7,500 is folded into your new principal and marked up a second time. At another 1.30 factor that is $2,250 for the privilege of paying twice for the same money.

At the FTC's forum, panelists described businesses "being forced to renew their advances or take out multiple MCAs at the same time, potentially encumbering the same receipts (a phenomenon known as 'stacking')" simply to keep meeting the last set of payments. Ask for a payoff quote with the unearned finance charge broken out as a separate line, ask whether the renewal is net funded or gross funded, then price the deal on the new money only.

None of this means never. An advance at triple digit APR is defensible in a narrow set of cases: the money buys inventory or a contract that returns more than it costs inside the repayment window, you cannot get a bank line in time, and the term is short. Paying $16,250 to unlock $50,000 is a good trade if it prevents a $60,000 loss or captures an $80,000 order. APR is the right way to compare offers. Total dollars against a specific return is the right way to decide whether to take one.

It cannot bridge a shrinking business: the holdback scales with sales, so a bad quarter stretches the term rather than cutting the cost. The Federal Reserve Banks' 2026 Report on Employer Firms, published March 3, 2026 with findings from the 2025 Small Business Credit Survey, found that 60 percent of firms that borrowed from online lenders reported actual borrowing costs were higher than expected. The tail of that distribution is ugly: New York's Attorney General settled with Yellowstone Capital on January 22, 2025 over advances the office said carried rates "up to 820 percent per year," cancelling $534,552,724 of small business debt, and won a judgment of more than $77,298,631 against Richmond Capital and related firms on February 8, 2024 over deals including a $10,000 advance repaid at $19,900 across ten days.

Before you sign, get the estimated term in writing, since without it the factor rate is not a price. Read the reconciliation clause. Ask whether there is a personal guarantee or a confession of judgment attached. Check whether your processor offers a cheaper version first. Then compare it against the boring alternative: on $100,000 a month of card volume, shaving 40 basis points off your effective processing rate is $4,800 a year, with nothing to repay.