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What Does Your Factor Rate Actually Cost? Run the Math.

Quick answer: total payback equals advance amount times factor rate, no compounding, no principal balance shrinking underneath it. Set your numbers below to see total cost of capital, your per-payment amount, and an honest effective monthly cost rate, not a mislabeled APR.

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Sourced defaults, no signup Built for ISOs, brokers, and merchants Runs entirely in your browser
1.35
Example Factor Rate
11
States With Financing Disclosure Laws
$500K
SB 362 Disclosure Threshold
2026
SB 362 Effective Year
The Calculator

Advance amount times factor rate, nothing hidden.

Set your advance amount, factor rate, term, and remittance frequency on the left. The panel on the right breaks total payback into a per-payment amount and a plain, non-compounded monthly cost rate.

Who this is for: ISOs and brokers use it to walk a merchant through exactly what a deal costs in dollars before they sign. Merchants use the same math to check a funder's numbers on their own. The formulas are identical either way.

Your Deal

California's SB 362 disclosure rules apply to commercial financing offers of $500,000 or less, effective January 1, 2026. Used here as the slider's practical ceiling. Source: Buchalter.

1.35 is the example figure MCA glossaries use to define a factor rate: a decimal multiplied by the funded amount. Source: lendsaas.com glossary.

Enter the term from your offer or deal sheet. Not a published industry default, terms vary deal to deal.

Most MCA remittances collect via daily ACH debit. Source: lendsaas.com glossary. Switch to weekly if your offer specifies a weekly draft.

Payback Breakdown

Total payback (RTR)$67,500
Total cost of capital$17,500
Total payments, at this frequency189
Per-payment amount$357

Cost, Stated Plainly

Advance amount$50,000
Term length9 months
Total cost, as a percent of advance35.0%
Effective cost per month3.9%
This Is Not An APR
3.9% Per Month

This is total cost of capital divided evenly across your term, a simple, non-compounded rate, not an interest rate and not the APR-equivalent figure some states now require lenders to disclose separately. See how the math works below.

How The Math Works

A factor rate is not an interest rate. Here is the actual difference.

A factor rate is applied once, at signing, to the full advance amount. It does not compound and it does not shrink as your balance goes down, the way interest on a traditional amortizing loan does. That structural difference is exactly why a factor rate and an APR describe cost in two different ways, even when they are describing the same deal.

Total payback (RTR)

Advance amount multiplied by factor rate, once, at signing. This number is fixed the moment the deal funds, regardless of how the term plays out.

Per-payment amount

Total payback divided evenly across every remittance in your term, daily or weekly, whichever your offer specifies.

Effective cost per month

Total cost of capital divided by advance amount, divided again by term in months. A plain rate for comparing offers, still not an APR.

Why not just show an APR? Because an accurate APR calculation accounts for a declining balance, the way a traditional loan works. MCA remittances are structured differently: fixed-dollar debits against a fixed total payback, not principal and interest. California's SB 362, effective January 1, 2026, now requires providers to disclose an APR-equivalent figure using a defined regulatory formula on commercial financing offers of $500,000 or less, and it restricts the marketing use of words like rate and interest for factor-rate products.

This calculator's effective monthly cost rate is a simpler, honest approximation built for comparing offers side by side. It is not a substitute for the regulatory APR-equivalent disclosure a provider is required to give you under your state's law, and it should not be quoted as one.

Sources

Every default, traced to a source.

No number on this page is invented. Here is exactly where each default came from.

  • Factor rate definition and the 1.35 example: a decimal multiplied by the funded amount to calculate total payback. Source: lendsaas.com's glossary of MCA terms.
  • Daily ACH as the common MCA remittance method: most MCA remittances collect via daily ACH debit. Source: lendsaas.com's glossary of MCA terms.
  • California SB 362, the $500,000 threshold, and its January 1, 2026 effective date: new limitations on the use of rate and interest language, plus an APR-equivalent disclosure mandate, for commercial financing offers of $500,000 or less. Source: Buchalter's SB 362 analysis.
  • Eleven states with commercial financing disclosure laws: California, Connecticut, Florida, Georgia, Kansas, Louisiana, Missouri, New York, Texas, Utah, and Virginia. Source: Alston Consumer Finance's disclosure requirements tracker.
  • Advance amount and term length: user-adjustable inputs, not sourced industry defaults. Enter the numbers from your own offer or deal sheet.
FAQ

Factor rates, answered.

What is a factor rate, and how is it different from an interest rate?
A factor rate is a decimal, for example 1.35, multiplied once against the advance amount to set total payback. It does not compound and it does not shrink as your balance goes down, the way interest on a traditional loan does. That structural difference is why a factor rate and an APR are not directly comparable numbers, even though both describe the cost of capital.
How is total payback (RTR) calculated from a factor rate?
Total payback, sometimes called RTR or right to receive, equals the advance amount multiplied by the factor rate. An advance of $50,000 at a 1.35 factor rate produces $67,500 in total payback, regardless of how long the term runs.
Why does this calculator show an effective monthly cost rate instead of an APR?
An accurate APR calculation accounts for a declining balance, the way a traditional amortizing loan works. MCA remittances are structured differently, fixed-dollar debits against a fixed total payback, so this calculator instead divides your total cost of capital evenly across your term to show a simple, non-compounded monthly rate. It is useful for comparing offers side by side, but it is not the regulatory APR-equivalent figure some states now require.
Do state disclosure laws require an APR-equivalent figure for MCA offers?
Yes, in a growing number of states. Eleven states now have commercial financing disclosure laws. California's SB 362, effective January 1, 2026, requires an APR-equivalent disclosure on commercial financing offers of $500,000 or less and restricts the marketing use of words like rate and interest for factor-rate products. This calculator's effective monthly cost rate is a simplified estimate for your own comparison, not a substitute for that regulatory disclosure.
Is this calculator built for ISOs and brokers, or for merchants?
Both. ISOs and brokers use it to walk a merchant through exactly what a factor rate means in dollars before they sign, and merchants use it to check a funder's numbers on their own before agreeing to an offer. The math is identical either way, it is only the advance amount, factor rate, and term that change.

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