Factor Rate vs Interest Rate: The Real Difference

Side by side

What it isA factor rate is a multiplier on the amount advanced. An interest rate is a percentage charged over time.

How cost is calculatedFactor: amount x rate, fixed on day one. Interest: charged on the balance still outstanding.

Does paying early save money?With us, yes on both. We discount for early payoff at 30, 60 and 90 days on advance products, and a full early payoff on the term loan takes 50% off the remaining interest. Note that many funders do not offer this on a factor-rate product — check any offer you receive.

Typical expression1.2 to 1.5 for an advance. 1% per month and up for a line of credit.

$50,000 at 1.35 factor$67,500 if carried to term. Less than that if paid off inside our 30, 60 or 90-day discount windows.

$50,000 at 1% per month, 12 monthsRoughly $3,300 in interest if drawn and repaid evenly, because the balance falls each month.

Which products use itFactor rates: merchant cash advances. Interest: lines of credit and term loans.

The short answer: A factor rate is not an APR and converting between them is misleading. The number to compare is total dollars repaid, and what the payoff drops to if you clear it early — which is where our 30, 60 and 90-day discounts change the maths against a standard advance.

Why the early-payoff rule is the whole game

On a standard factor-rate advance, the cost is set the moment the money lands. Pay it off in month three instead of month twelve and, on most agreements elsewhere, you still owe the entire payback amount. The speed saved you nothing. That is the industry norm and it is worth checking on any offer you are given.

We price it differently. Our advance products carry early payoff discounts at 30, 60 and 90 days, so clearing the balance quickly genuinely reduces what you repay. On the term loan a full early payoff takes 50% off the remaining interest.

Standard factor-rate advances elsewhere: cost fixed at funding, no reward for repaying fast

Ours: early payoff discounts at 30, 60 and 90 days

Interest products: cost tracks how long you hold the money

Line of credit from 1% per month plus a 2.49% draw fee

Term loan at 0% origination, 50% off remaining interest on full early payoff

How to compare an offer honestly

Ask for two figures and ignore everything else: the total payback and the payoff amount at month three. Those two numbers expose the real structure of any offer regardless of how the rate is described.

Total paybackEverything you will repay across the full term

Payoff at 30, 60 and 90 daysWhat it costs to clear early. We discount at all three; many funders discount at none.

Payment frequencyDaily debits drain a business faster than weekly, at the same headline cost

Fees on topOrigination, draw, maintenance, early termination

How it works

1. Apply in minutes

A short application. No impact to your credit score to see what you qualify for.

2. Same-day decision

We review revenue, time in business and bank activity — not just a credit score.

3. Review your terms

You see the amount, the term and the total cost before you sign anything.

4. Funded next business day

Money in your account, typically the next business day after signing.

Common questions

Is a 1.3 factor rate the same as 30% interest?

No. A 1.3 factor rate on $50,000 sets a $15,000 cost if carried to term, because it does not accrue over time the way interest does. 30% interest on a declining balance over a year costs considerably less, because the balance falls as you repay. Our early payoff discounts at 30, 60 and 90 days narrow that gap.

Can I convert a factor rate to an APR?

You can calculate one, but it is misleading, because the APR swings wildly with the repayment term while the factor cost is set at funding. Compare total dollars repaid and the early payoff figure instead.

Which is cheaper?

Interest-bearing products are almost always cheaper if you qualify. Factor-rate products exist because they fund files that an interest-bearing product will not.

Does paying a factor-rate advance early save money?

With us, yes — we discount early payoff at 30, 60 and 90 days. Across the wider market, often not, so check the agreement for a prepayment discount before assuming it does.

What do you charge?

A line of credit from 1% per month with a 2.49% draw fee, or a term loan at 0% origination with 50% off remaining interest for a full early payoff. Advance products carry early payoff discounts at 30, 60 and 90 days.

Factor rate vs interest rate: they are not the same number.