Pricing
A factor rate is a multiplier on the amount advanced. Multiply, and you have the total payback. That is the whole calculation.
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Total payback = amount × factor rate. Cost = payback − amount. Because the total is fixed at signing, paying early does not lower it unless the agreement says so.
| Factor | Payback on $50,000 | Cost |
|---|---|---|
| 1.15 | $57,500 | $7,500 |
| 1.20 | $60,000 | $10,000 |
| 1.25 | $62,500 | $12,500 |
| 1.30 | $65,000 | $15,000 |
| 1.40 | $70,000 | $20,000 |
A factor rate says nothing about time until you divide the cost by the months. A 1.25 factor repaid over four months costs 25% for four months of use, while the same factor repaid over ten months costs 25% for ten. The shorter one is more expensive per month of money. Compare offers by cost per month of use as well as total cost.
When two offers differ in both factor and term, the lower factor is not always the cheaper per month. Do the division.
Funders price from the file: deposit strength, account health, time in business, existing obligations and the structure requested. A cleaner account, fewer low-balance days and a smaller request relative to deposits tend to lower the factor. Improving those items over a few months can change the next offer more than shopping across many providers.
No. It is a fixed multiplier, so the cost does not change with time. Converting to an annual rate depends on how long the advance is outstanding.
Because the same dollar cost is spread over fewer days.
It depends on the file and the structure. Ask for the total payback in dollars.
Educational information only. It is not legal, tax or accounting advice.
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