Factor Rate Calculator

A factor rate looks small on paper, often 1.15 to 1.40, but it sets the total amount you must repay no matter how fast you pay. This tool works out that total for a merchant cash advance: the full payback, the cost of capital, a comparable APR estimate, your daily remittance, and what you actually receive after fees. A second tab converts lease money factors to APR for car leases. The APR here is a simple annualization of the cost over the term, and the page says so plainly, because a factor rate has no interest rate until you choose how to annualize it.

Quick Answer

How to use the factor rate calculator

Start on the merchant cash advance tab for funding offers. The lease tab is only for car lease money factors.

1. Advance, factor rate, term: copy them from the offer exactly as written. The payback preview updates as you type, so you can sanity-check the offer's own payback figure before you calculate.
2. Daily sales and remittance (optional): add both and the tool switches the payback period from a term-based estimate to your actual pace of repayment, and shows the daily remittance amount.
3. Origination fee (optional): add it to see the net advance, the cash that actually lands in your account.
4. Lease tab: enter a money factor or an APR, convert between them, and optionally add the net capitalized cost and residual value to get the monthly rent charge.

The factor rate formulas, including the conversions the tool makes

Payback is advance times factor rate, and cost is payback minus advance. The APR estimate annualizes that cost over the term, and the daily payment spreads the payback over the business days in the term.

Two conversion choices inside the tool are worth knowing, because they move the last decimal places. Terms entered in months are converted at 30.44 days per month and years at 365.25 days, which is why a 1.35 factor over 6 months shows 69.99% rather than a round 70%: the term in years comes out a hair over half a year. And the APR formula is the simple one most factor rate tools use: cost divided by the original advance, annualized. It does not model the declining balance, a point the disclosure section below takes seriously. The Consumer Financial Protection Bureau defines APR as the annual cost of credit including fees in its key credit terms guide, which is the standard this estimate is meant to be compared against, not a substitute for a regulated disclosure.

Worked example: a $40,000 advance at 1.25

Advance of $40,000, factor rate 1.25, term 12 months, daily sales of $5,000 with a 10% remittance, and a $1,000 origination fee. These are the pre-filled values, and every figure below is the tool's own output.

Notice the two different daily figures, because offers quote both. The $500 daily remittance is what a 10% holdback on $5,000 of daily sales actually takes, and at that pace the advance is repaid in 100 days, far faster than the 12-month term. The $191.57 is the fixed-schedule equivalent: the same payback spread evenly over the term's business days. If your sales hold up, the remittance route finishes sooner, and finishing sooner raises the true annualized cost even though the dollars never change.

The same factor rate at different terms

Term length is the whole story in factor rate pricing. This table runs a $50,000 advance through the tool at four common factor rates and three terms; the APR column is the tool's simple annualization.

Read the table by rows for price and by columns for speed. A funder offering 1.35 "for only six months" is not offering a cheaper deal than 1.35 over twelve: the cost is the same $17,500, taken twice as fast. The badge under your result uses this page's own reading bands on the simple APR (30% and under moderate for an advance, 30% to 60% expensive, over 60% very expensive). They are a reading aid for comparing offers against each other, not an industry rating.

What this APR estimate is, and what a disclosure APR would say

The simple annualization is the right tool for ranking two offers quickly, and the wrong tool for quoting a legal cost of credit. Two honest limits matter.

First, the balance declines as you repay, so a dollar of cost charged on a shrinking balance is more expensive than the same dollar charged on the full advance all year. An internal-rate-of-return calculation on the actual daily payments, or the average-balance shortcut some advisors use, lands roughly double the simple figure for a typical advance. Second, regulators in the largest states have stopped leaving this to estimates: New York's sales-based financing disclosure rules require an estimated APR calculated under the federal Regulation Z method in Financial Services Law section 803, and California's regulations set their own estimated APR method for sales-based financing in title 10, section 942. If you are signing in one of those states, the disclosure form the funder must give you is the authoritative rate; use this page to understand and cross-check it, and use our effective interest rate calculator when you want the declining-balance view of a conventional loan to compare against.

Remittance, holdback and the net advance

Most advances are repaid as a fixed percentage of daily card sales: the remittance, or holdback. It feels gentle because it moves with sales, and on slow days it genuinely takes less. The trap is arithmetic, not intent: strong sales retire the fixed payback faster, which raises the annualized cost, while weak sales stretch the term and keep the daily drain running longer.

The fee works the other way. It never appears in the payback, so offers can quote a clean factor rate while the origination fee quietly shrinks what you receive: in the worked example you pay $10,000 for the use of $39,000, not $40,000. When you compare an advance against a conventional loan, compare like with like: a loan's interest accrues day by day on the balance, which our daily interest calculator shows in detail, and a term loan quote from a lender can be run through the business improvement loan calculator to see what the same dollars cost on a fixed schedule with interest you can save by paying early.

Lease money factors: the other factor rate

Car leases use a different factor: the money factor, a small decimal like 0.00250 that plays the role of an interest rate. The industry conversion is APR = money factor × 2400, so 0.00250 is about 6.00% APR, and the reverse conversion divides an APR by 2400. LegalClarity's explainer on interest in car leasing sets out the same 2400 rule and why lease contracts show a rent charge instead of a rate.

Two behaviours of the lease tab to know before you rely on it. If you fill in both the money factor and the APR box, the money factor wins and the APR box is ignored, so clear it if you meant to convert from APR. And the monthly rent charge, (net capitalized cost + residual) × money factor, only appears when both the capitalized cost and the residual are entered: with the pre-filled 0.00250, $28,000 and $16,000, it is $110.00 a month. That is the finance slice of a lease payment only, not the whole payment; depreciation and tax sit on top of it, and the adjusted lease balance calculator covers the balance side of a lease already in progress.

Merchant cash advance: an honest balance sheet

An advance is neither a scam nor a bargain; it is expensive speed. The trade, stated plainly:

What competing calculators miss

The rival tools for this keyword each cover part of the job:

• Broker Shop's MCA calculator: payback, cost and the same simple APR conversion, with a useful conversion table. It stops there: no remittance modelling from your actual sales, no net advance after fees, and no fixed-schedule daily payment for cash-flow planning.
• Liberty Capital's factor rate estimator: payback and days to payoff from holdback and daily sales, but its annualized figure uses an average-balance method it declines to call an APR, so its numbers cannot be compared line by line with tools using simple annualization.
• BraveCalculator's factor rate calculator: an IRR-based APR, which is the more precise method, presented without the simple figure most offers are informally compared on. Readers get one method or the other, rarely both explained side by side.
• Lease tools (LeaseGuide, LegalClarity and the lease calculators): the money factor conversion done well, but entirely separate from MCA pricing, even though both meanings of "factor rate" share the same search results.
• The gap this page fills: both meanings in one place, the remittance and fee outputs the MCA rivals skip, the term conversion conventions stated instead of hidden, and an APR that labels its own method and points you to the regulated disclosure figure where one exists.

Financial disclaimer: this calculator is an educational tool, not financial advice. Merchant cash advances are high-cost products; the APR figure is a simple estimate for comparing offers, not a legal disclosure. Fees, actual sales patterns and contract terms all affect the real cost. Consult a qualified financial professional or attorney before accepting business funding.

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