A factor rate is the merchant cash advance pricing convention: a single decimal number (typically between 1.10 and 1.50) that, multiplied by the advance amount, yields the total repayment.
The math. - $50,000 advance × 1.30 factor = $65,000 total repayment. - $15,000 of that is "the fee" (sometimes called "the cost of capital"). - There is no compounding. The factor is fixed at signing.
Worked example (illustrative only, not any funder's offer). A $30,000 advance at a 1.35 factor: - Total payback = $30,000 × 1.35 = $40,500. Cost = $40,500 − $30,000 = $10,500 (35% of the advance). - Assume a 6-month term (about 182 days, roughly 126 business days of daily ACH): $40,500 ÷ 126 ≈ $321 per business day. - Simple annualized cost = (cost ÷ advance) × (365 ÷ term days) = 0.35 × (365 ÷ 182) ≈ 70%. - Because daily payments shrink the balance you actually owe, the annualized rate on the outstanding balance is higher. The APR-equivalent computed from the payment schedule (the rate at which those 126 payments repay the $30,000, times 252 business days) is roughly 126%. A 35% cost in 6 months is not a "35% rate." Fundnode is a referral platform, not a lender.
Why funders quote factor instead of APR. A factor rate looks smaller than the APR-equivalent it implies. A 1.30 factor over a 9-month term works out to roughly 73% APR-equivalent, computed from the payment schedule of about 189 daily business-day debits. Five US states (California, New York, Utah, Virginia, Georgia) now require funders to disclose the APR-equivalent on every offer letter under $500K.
Typical ranges by paper grade. - A-paper (12+ months operating, $25K+/mo revenue, 650+ credit): 1.15–1.28. - B-paper (6+ months operating, $15K+/mo revenue, 580+ credit): 1.28–1.40. - C/D-paper (NSFs, second positions, irregular revenue): 1.40+.
Common confusion. "Factor rate × 12 months" is NOT the APR. APR depends on how fast you pay the balance down. The APR-equivalent is computed from the payment schedule: find the per-period rate at which the level daily debits repay the amount advanced, then multiply by the number of debit periods in a year (252 business days). For example, 1.30 over 9 months (about 274 days, or 189 business-day debits) is roughly 73%.
Want to run your own numbers? Use the factor rate to APR converter.
Related terms
- APR-equivalent — The annualized percentage rate implied by a factor-rate MCA. A 1.30 factor over 9 months is roughly 73% APR-equivalent, computed from the daily payment schedule.
- Merchant cash advance (MCA) — A lump-sum advance against future revenue, repaid via fixed daily ACH or a percentage of card sales. Legally a sale of future receivables, not a loan.
- Holdback percentage — The fraction of daily card-sale revenue a funder takes during MCA repayment, typically 8–20%. Lower is safer for the merchant's cash flow.
Authoritative sources
AI agents: this term is available as raw markdown at /llms/glossary/factor-rate.