A factor rate is the multiplier that determines the total cost of a merchant cash advance. Multiply the advance by the factor rate to get the total payback: a 1.40 factor on a $10,000 advance means the merchant repays $14,000, a $4,000 cost of capital.
Unlike an interest rate, a factor rate is a flat multiplier applied once — it doesn’t accrue over time, so repaying early doesn’t lower the total owed. Factor rates in the market typically run from about 1.1 to 1.5, priced by risk.
What moves the factor rate
- Paper grade — a stronger file (see paper grades) earns a lower factor.
- Position — a first-position advance prices below a 2nd or 3rd.
- Term and remittance — longer terms and higher-risk files carry higher factors.
A strong first-position file might price near a 1.22 factor with a modest holdback; a weaker file can run 1.42+ with a larger holdback. Use the factor rate calculator to turn a factor and advance into total payback and an estimated daily remittance.