Factor Rate to APR Calculator
Estimate APR from a factor rate using equal monthly payments. See total repayment, total cost and the implied monthly payment.
Factor rate versus APR
A factor rate is a fixed multiplier on the funded amount. An APR estimate also depends on when payments are made. This calculator solves for the monthly rate that discounts equal monthly payments to the funded amount, then multiplies that rate by 12.
Realized yield depends on the remittances actually collected. See merchant cash advance for Zolvo’s current workflow scope and the MCA servicing software guide for further reading.
Frequently asked questions
How do you convert a factor rate to an APR?
A factor rate is a fixed multiplier, not an annual rate, so converting it to an APR 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. Because that cost is repaid over a short term while the balance declines, the annualized rate is found by solving for the rate that makes the stream of payments equal the funded amount, then annualizing it. This calculator does that and reports an estimated APR.
Why is the APR so much higher than the factor rate suggests?
A 1.4 factor rate sounds like 40 percent, but that 40 percent cost is earned over only a few months, and you are paying the balance down the whole time. Annualizing a fixed cost over a short term, on a declining balance, commonly produces an APR of 60 to 150 percent or more. This is the core reason factor-rate pricing is compared carefully against an interest rate.
Does repaying early reduce the cost?
Usually not. Unlike an interest rate that accrues over time, a factor rate fixes the total dollar cost at funding. Repaying a merchant cash advance early generally does not reduce what you owe unless the funder offers an explicit early-payoff discount, which means early repayment actually raises the effective APR because the same cost is compressed into less time.
Is this APR exact?
No. It is an estimate that models the advance as equal monthly payments over the term. Real merchant cash advances remit daily or weekly and may carry origination or other fees, which can push the true APR higher. Use this as a directional comparison, then confirm exact terms with the funder.
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