Free MCA Tool

Factor Rate to APR Converter

Turn any MCA factor rate into a real APR so you can see what you're actually paying.

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What Is the Factor Rate to APR Converter?

Factor rates exist because MCA providers don't want you thinking in APR. A 1.3 factor rate means you pay back 130% of what you borrowed -- but is that better or worse than a bank loan at 12% or an SBA loan at 7%? This converter does the math they hope you won't. A "modest" 1.2 factor rate repaid over 4 months? That's roughly 87% APR. Over 3 months, it hits about 116% APR. Same dollar cost, but crammed into fewer days, which makes the annualized rate explode. This is the single most important number to look at before signing an MCA.

How to Use This Converter

Enter the Factor Rate

Pull the factor rate from your MCA offer -- the multiplier on your funded amount (1.25, 1.35, 1.45, etc.).

Set the Repayment Term

How long until you're paid off, in months. If your provider quoted days, divide by 30 to get an approximate month count.

Compare Against Alternatives

See the equivalent APR and how it stacks up against a standard 10% term loan. If the gap is enormous, the MCA isn't worth the premium.

Key Concepts

Factor Rate Mechanics

Dead simple math: funded amount times factor rate equals total repayment. No compounding, no reduction as you pay down principal. What you owe is fixed from day one.

Time Is the Hidden Variable

A 1.3 factor rate costs the same dollars whether you pay it off in 3 months or 12. But annualized, the 3-month version is 4x more expensive. Time changes everything.

APR Calculation Method

The formula: APR = ((Factor Rate - 1) / Term in Years) x 100. It's a straight-line approximation the industry uses. Not perfect, but close enough to show you the real cost.

Why MCA Providers Avoid APR

MCA providers claim since they're "buying future receivables" rather than lending, APR doesn't apply to them. California, New York, and Virginia disagree -- they now require APR-equivalent disclosure on commercial financing.

State Disclosure Laws

California's DCFPL, New York's Commercial Finance Disclosure Law, and Virginia's CDFA all now force APR-equivalent disclosure from MCA providers. Ask for it even if your state doesn't require it.

Expert Insights

Any factor rate above 1.15 on a term under 6 months puts you above 50% APR. At that price, the capital you're borrowing needs to generate 3-4x the financing cost in new revenue, or you're losing money.

Don't stop at APR -- also do the dollar-cost-per-thousand math. A $50K advance at 1.3 costs $300 per thousand borrowed. A $50K line of credit at 18% APR for 6 months costs about $46 per thousand. That's a 6x difference most people never calculate.

If your converted APR is triple digits, exhaust every other option first: SBA microloans (6-8%), CDFI loans (8-15%), invoice factoring (15-35%), or even credit cards (18-25%). All of them are radically cheaper.

Frequently Asked Questions

Because all that cost is crammed into a short window. Going from 1.2 to 1.3 on a $50K advance adds $5,000 in total cost. Spread that over just 4 months and it translates to roughly 30 extra APR points.

It's the most standardized way to compare. But don't ignore total dollar cost and daily cash flow impact. A loan at 15% APR with fixed monthly payments hits your cash flow very differently than an MCA with variable daily holdbacks.

In APR terms, yes -- same factor rate over a longer period gives you a lower annualized rate. But you pay the same total dollars either way. A 1.3 factor rate costs 30 cents per dollar whether you repay in 3 months or 12.

More fintech lenders are doing this voluntarily now, and several states mandate it. Companies like Clearco, Capchase, and some invoice factoring firms price on APR directly. Those are the providers worth talking to first.

This calculator provides estimates for educational purposes only. Actual results depend on your specific business financials, lender terms, and market conditions. Consult a qualified financial advisor before making major business financing decisions.