Factor Rate
A decimal figure used to calculate the total repayment amount on certain funding types, like merchant cash advances.
A factor rate is a decimal multiplier (commonly between 1.1 and 1.5) used instead of an interest rate to calculate the total amount owed on certain financing products, most often merchant cash advances. You multiply the funding amount by the factor rate to get the total repayment amount.
Unlike an interest rate, a factor rate is fixed and doesn’t change based on how quickly you repay. Because factor rates and interest rates are calculated differently, they aren’t directly comparable without converting one to the other.
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