Is an MCA Factor Rate Monthly or for the Whole Advance?
A factor rate applies to the whole advance, once. It isn't charged monthly or annually, so the total you'll pay back is set on day one no matter how long the payments take.
How do you use a factor rate?
Multiply the amount advanced by the factor rate to get the purchased amount, the total the funder will collect. The difference between the two is the cost. Because it's a single multiplier, it doesn't grow over time the way interest does.
Why do people confuse it with a monthly rate?
Factor rates are written as decimals that look a lot like interest rates, and some salespeople describe them loosely. A factor rate of one point something isn't the same as an interest rate of that many percent per month. It's a one time charge covering the whole advance.
Why does the term change what a factor rate costs?
Even though the cost is fixed, how fast you pay it matters. The same factor rate on a short advance produces a much higher estimated APR than on a longer one, because the same dollar cost is squeezed into less time. That's why comparing offers on factor rate alone can mislead you.
What should you compare instead?
- The net funding you'll actually receive.
- The total payback.
- The payment amount and frequency.
- The estimated term.
- Any early payoff discount.
Put those side by side and the real differences between offers become clear.
Are fees included in the factor rate?
Underwriting, administrative and wire fees are usually subtracted from the funding and aren't part of the factor rate. Two offers with the same factor rate can cost different amounts once fees are included.
How can you check the cost yourself?
Divide the purchased amount on your contract by the purchase price. The result is the factor rate, even if the contract doesn't print it. Then check how much of the purchase price reaches your account after fees.
Which Afterfirst tools help?
Our factor rate calculator shows the total payback and cost in dollars for any amount and factor rate, and the APR calculator estimates how the cost looks over time.
What if someone quotes you a monthly rate?
If a salesperson describes an advance as costing a certain percent per month, ask them to show you the total payback in dollars. A monthly framing sometimes makes a short advance sound cheaper than it is, or makes it hard to compare. The total payback and the net funding cut through the language.
Does revenue-based financing price the same way?
Revenue-based financing and some short loans also use a fixed fee or a multiple. The same logic applies: the cost is set once, not monthly.
How can Afterfirst help with this?
Call 877-FUND-654 with any offer you're holding. We'll show you the total cost in dollars and how it compares with other offers once fees and term are included.
What else do owners ask about this?
More short answers on this topic are on the cost FAQ, and the factor rate calculator runs the numbers for your own file.
Have a question we didn't answer?
Ask us on the call. Call 877-FUND-654 with any question. We call you back, usually the same business day, and we always talk with you before we shop your file.