Glossary
A multiplier applied to the amount advanced to set the total you repay.
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A multiplier applied to the amount advanced to set the total you repay.
Total payback equals the advance multiplied by the factor rate. A 1.25 factor on $40,000 means $50,000 comes back. The multiplier is fixed at signing, so the cost does not grow with time the way interest does.
It is the single number that sets what the money costs, so it is the first thing to understand.
On $40,000 at 1.30 the payback is $52,000, a cost of $12,000. At 1.20 it is $48,000, a cost of $8,000.
Canadian merchants meet factor rates on advances and revenue-based facilities. Always ask for the total payback in dollars and the number of months.
When a funder lists a factor on an offer, it is the first number you should multiply. In a file review, the factor is read together with the repayment period: the same 1.25 over four months is a very different monthly burden from 1.25 over ten. Ask which period the factor assumes and what happens to it if sales run slow.
People often assume a smaller-looking number like 1.2 must be cheap. It is a 20% cost on the whole amount, due in full whatever the timing, so it is better to measure it against what the money will earn.
Not if the term is much longer or fees reduce the amount you receive. Compare total dollars and time.
See the related guides and the comparison pages, or apply and ask.
No. It is educational information, and agreements vary.
Educational information only. It is not legal, tax or accounting advice.
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