Factor rate
A multiplier applied once to an advance amount to give the total repayment — a $50,000 advance at 1.40 means $70,000 repaid.
Unlike interest, a factor rate does not compound and does not shrink as the balance falls. The cost is fixed at signing, so repaying early does not reduce it — it compresses the same cost into less time, which raises the effective annual rate rather than lowering the bill.
Why it matters to a broker
Merchants routinely compare a 1.4 factor to a bank quoting 12% and conclude the first is cheaper. Heading that off early is most of what makes the pricing conversation go well.
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