Three calculations a broker is asked to do out loud, in front of a merchant. Each one shows its formula, because a calculator that will not tell you its method is not one you should quote from.
Typically 1.15–1.50. Below 1.2 is strong paper; above 1.45 is usually a later position.
IRR-derived, annualised. What a lender would have to charge to be equivalent.
Cost over advance, scaled to a year. Ignores the declining balance.
35¢ on every dollar advanced.
Business days. Weekends and holidays do not debit.
The two rates differ because the simple figure pretends the merchant holds the full advance for the whole term. They do not — they start repaying the next business day. The APR line is the honest comparison against a bank quote, and it is roughly double the simple number for any typical advance.
Above: factor rate to APR. The method and the caveats.
Factor rate to APR
A 1.35 factor rate repaid daily over six months works out to roughly 126% APR — about double the 70% you get from the simple cost-over-advance calculation, because the merchant starts repaying the next business day rather than holding the full advance for the term.
Holdback and daily payment
A 12% holdback on a merchant doing $120,000 a month takes about $686 a business day, repaying a $50,000 advance at 1.35 in roughly 4.7 months — and if revenue falls, the term stretches rather than the merchant defaulting.
Cost per funded deal
Fifty leads at $60 with a 60% contact rate, 40% submitted, 50% approved and 33% closed produces two funded deals at about $1,515 each — and at those rates you could pay $246 a lead and still break even.
Every one of these shows its formula, and every one says where it stops being reliable. A calculator that does neither is asking you to quote a number to a merchant on trust — which is a bad habit in a market that has spent three years being legislated at for exactly that.
We will tell you straight up if we cannot help you. No commission deals, no free trials, no chasing you for three weeks.