What Is a Good Factor Rate for an MCA?
A good factor rate is the lowest one you're offered for a payment you can carry, and it has to be read with the term. 1.30 over twelve months is much cheaper than 1.30 over four. Compare offers by total cost per dollar you actually receive, after fees, and by an estimated APR. Those two numbers tell you more than the factor alone.
What does this look like with real numbers?
| Offer | Factor | Term | Cost per $1 | Why it differs |
|---|---|---|---|---|
| First | 1.30 | 12 months | $0.30 | Long term spreads the cost |
| Second | 1.30 | 4 months | $0.30 | Same cost per dollar, far higher APR |
| Third | 1.25 with a 4% fee | 6 months | about $0.30 | The fee eats the lower factor |
All three cost about the same per dollar. Only an APR estimate shows that the second is the most expensive over time. Try the APR calculator.
Why did some states add APR disclosures?
California and New York require an estimated APR on sales-based financing disclosures for covered offers. That's one more number to compare.
Why compare cost per dollar, not factor alone?
Two offers can share a factor and cost very different amounts once fees and term are counted. Divide the total payback minus the cash you actually receive by that cash. That's your cost per dollar. Then check the term: the same cost over three months is a much higher yearly rate than over twelve. The APR calculator does both steps.
How do you work out cost per dollar?
Take the total payback, subtract the money that actually lands in your account, and divide by that same landed amount. Fees taken out at funding raise the result, which is why two offers with the same factor rate cost different amounts per dollar.
What should you ask the funder?
- What's the total payback and the cash I receive?
- What's the estimated APR?
- Are any fees taken out of the funding?
- Would a longer term change the factor?
Where can you check your own numbers?
The short version is in the Cost FAQ. To check the numbers on your own advance, use the APR calculator.
Where do these facts come from?
Want a second look at your advance?
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.