Factor rate to APR decoder

How the calculation works

The total repaid is the advance multiplied by the factor, split into equal repayments each working day, week or month. The calculator then finds the rate at which those repayments equal the cash you received.

Find r such that Net cash = Payment × (1 − (1 + r)^−n) ÷ r; yearly rate = (1 + r)^periods per year − 1

Because you start repaying straight away, you have the full amount for only a moment and less of it every day. That is why a 20% fee over six months becomes a yearly rate far above 20%.

Questions, answered

Is a factor rate the same as an interest rate?

No. A factor rate is a multiplier on the amount borrowed, charged in full however long the money is held. An interest rate charges for time.

What does a 1.20 factor rate mean?

You repay 1.2 times what you borrow: £60,000 on £50,000. Repaid daily over six months, that is roughly 111% a year.

Why compare with an APR loan?

Because it shows the price of speed and flexibility. If a loan at 12% APR is available to you, the difference is what the factor-rate product really costs extra.

An illustration from the figures you enter, not a quote or advice. A provider’s offer depends on its assessment of your business.