# Factor Rate

> A factor rate is a decimal multiplier — usually between 1.1 and 1.5 — used to calculate the total amount you'll repay on a merchant cash advance or short-term advance, rather than an annual interest rate.

## Key takeaways
- A factor rate is a decimal multiplier (usually 1.1–1.5), not an interest rate — multiply it by the amount funded to get total repayment.
- The full cost is fixed up front, so paying off early usually does not save you money.
- Convert a factor rate to an APR before comparing it against term loans or lines of credit.

## How a factor rate works

When you take a merchant cash advance (MCA) or similar short-term advance, the
lender doesn't quote an interest rate — they quote a **factor rate**, a simple
decimal that sets the total cost up front. You multiply the amount funded by the
factor rate to get your total payback.

For example, a **$50,000** advance at a factor rate of **1.3** means you repay
**$65,000** total — the extra **$15,000** is the cost of the money, regardless of
how quickly you pay it back.

### Why factor rates can be deceptive

A factor rate looks small next to a percentage, but it isn't an annual figure.
Because the full cost is fixed and the repayment term is short (often 6–18
months), the equivalent **APR can be much higher** than the factor rate suggests
— sometimes 40%–100%+. And unlike interest, **paying off early usually doesn't
save you money**, since you still owe the full factored amount.

### How to compare offers

- Always ask for the **total dollar cost**, not just the factor rate.
- Ask whether there's any **early-payoff discount** (many MCAs don't offer one).
- Convert to an **APR** when possible so you can compare against term loans and
  lines of credit, which are usually cheaper.

If a factor-rate product is the only thing you qualify for today, that's useful
to know — but it's worth checking whether you qualify for lower-cost financing
first. Hoss Capital can match you with options across the cost spectrum so you
can compare real numbers.

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