Factor Rate to APR Calculator
This free calculator converts a merchant cash advance factor rate into an estimated APR. Enter the funded amount, the factor rate, and the repayment term, and it returns the total repayment, the total cost, the estimated monthly payment, and an estimated annualized percentage rate.
Factor rate versus APR
A factor rate prices financing as a fixed multiplier on the funded amount rather than as an annual rate. The total repayment is the funded amount times the factor rate, and the cost is fixed at funding. Because that cost is earned over a short term while the balance is paid down, the annualized rate is far higher than the multiplier looks.
How the APR is estimated
The calculator models the advance as equal monthly payments over the term and solves for the rate that makes those payments equal the funded amount, then annualizes it. A 1.4 factor rate repaid over six months commonly works out to an APR well over 100 percent. This is an estimate: real merchant cash advances remit daily or weekly and may add fees, which can push the true APR higher.
For funders
The factor rate sets the gross economics, but realized yield depends on collecting the agreed remittances on schedule. Zolvo reconciles daily and weekly remittances through payment matching, detects missed payments early, and monitors performance for merchant cash advance portfolios.
Frequently asked questions
How do you convert a factor rate to an APR?
Converting requires the funded amount, the factor rate, and the repayment term. The total cost is the funded amount times the factor rate minus the funded amount; the APR is the rate that makes the stream of payments equal the funded amount, annualized.
Why is the APR so much higher than the factor rate?
A 1.4 factor rate sounds like 40 percent, but that cost is earned over only a few months on a declining balance, so annualizing it commonly produces an APR of 60 to 150 percent or more.
Does repaying early reduce the cost?
Usually not. A factor rate fixes the total dollar cost at funding, so early repayment generally does not reduce what is owed and actually raises the effective APR unless the funder offers an explicit discount.
Is this APR exact?
No. It models equal monthly payments over the term; real advances remit daily or weekly and may carry fees, which can push the true APR higher. Confirm exact terms with the funder.