Factor rate to APR calculator
Turn a factor rate and a term into the annual rate a merchant compares it with.
The deal.
Typically 1.15–1.50.
What it costs.
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.
How it is calculated.
Total payback. Advance × factor rate. A $50,000 advance at 1.35 repays $67,500, of which $17,500 is cost.
Payment. Total payback ÷ number of payments. We count 21 business days a month and 252 a year, because weekends and holidays do not debit.
Simple annualised. Cost ÷ advance, scaled to twelve months. This is the number most people reach for, and it understates by roughly half because it pretends the merchant holds the whole advance for the whole term.
Estimated APR. The periodic rate that discounts the payment stream back to the advance, annualised — solved by bisection. This is what a lender would have to charge to be equivalent, and it is what disclosure regimes approximate.
Where it stops being reliable
- State disclosure methodologies are prescribed and differ in their details. This is an estimate for comparison, not a compliant disclosure — if you need one of those, it comes from the funder.
- Fees change the answer. Origination, underwriting and ACH fees are cost, and leaving them out flatters the rate.
- A term is a modelling convenience. An advance with a genuine holdback has no fixed maturity, which is what the holdback calculator is for.
Questions.
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