Merchant cash advance factor rates in 2026: what they cost

How a factor rate works

A factor rate is written as a decimal, like 1.25. Multiply the advance by it and you get the payback, the total you repay. A hypothetical $50,000 advance at a 1.25 factor repays $62,500. The $12,500 difference is the cost, and it is set the day you sign.

Read the decimal as cents per dollar. At the bottom of our range, 1.05 costs 5 cents for every dollar advanced. At the top, 1.44 costs 44 cents.

Unlike interest, the cost does not grow if repayment takes longer. It also does not shrink if you pay early, unless the contract carries a prepayment discount. Ask for one before you sign. After signing, you have nothing left to bargain with.

What moves a file up or down the range

Underwriters price risk. Everything below either makes your future deposits look more certain, which pulls the factor down, or less certain, which pushes it up. Some of it can change fast, because the newest month of statements carries the most weight.

• Deposit strength and consistency. Steady deposits that arrive on a schedule price best. Lumpy or falling deposits price worse.
• Daily balances, negative days and NSFs. A balance that holds through the month helps. Bounced payments in the last month hurt most.
• Existing advances. A first position prices better than a second, because each open position already takes a slice of the same deposits.
• Time in business. A longer history gives the funder more months to trust.
• Credit score. It matters less than the statements, but lower scores still price higher.
• Industry. Some industries carry more seasonal swings or more risk in a funder's book, and the pricing reflects it.
• Term and size. Longer terms and larger advances for the same deposits usually price higher, because the funder waits longer and has more at stake.
• Repayment history. A renewal after an advance paid as agreed is the strongest case for the low end.

Factor rate vs APR: a hypothetical worked example

A factor rate tells you the total dollar cost. An APR tells you that cost per year, so it accounts for how fast you repay. An advance is not a loan, so the contract is priced on a factor rate, not an interest rate. Converting it to an APR equivalent still helps when you compare an advance against a loan or a line of credit.

Take one hypothetical $50,000 advance at a 1.25 factor. The payback is $62,500 and the cost is $12,500 either way. Spread over six months, that is 126 business-day payments of about $496, which works out to an APR equivalent of roughly 92 percent. Spread over twelve months, it is 252 payments of about $248, and the APR equivalent drops to roughly 46 percent. Same dollars, very different APR. These figures assume equal payments on every business day, the same method our factor rate calculator uses.

So which number matters? All three. The total cost tells you what the money costs your business. The APR equivalent is the fair way to line an advance up against a loan offer, and a bank loan almost always wins that comparison. The daily or weekly payment tells you how hard it squeezes your cash flow while you repay. If your disclosure does not show an annualized figure, ask for one.

Fees on top of the factor rate

The factor rate is not always the whole price. Many advances carry upfront fees that come out of the funded amount before it reaches your account: origination, underwriting, ACH program, wire or bank verification fees. You still repay against the full advance.

Back to the hypothetical $50,000 at 1.25. Say $1,500 in fees comes off the top. You receive $48,500, but the payback is still $62,500. Your real cost is $14,000 on the cash you actually got, which is like paying a factor of about 1.29. On the six-month version, the APR equivalent rises from roughly 92 percent to roughly 105 percent.

Watch the back end too: default fees, blocked payment fees and collection costs. They only apply if something goes wrong, but know what they are before you sign. Our guide to reading an MCA contract shows where each one hides.

How to compare two offers

Two offers with the same factor rate are not always the same price. Line them up on the numbers below, in writing, before you sign either one, and set each payment next to your slowest recent week of deposits. A cheap factor on a payment you cannot carry is still the wrong deal.

• The net funded amount after every upfront fee.
• The total payback.
• The payment amount, and whether it is debited daily or weekly.
• The number of payments, which sets the real term.
• The APR equivalent, if you are also weighing a loan or a line of credit.
• The prepayment discount schedule, if there is one.

Common questions