How do I convert a factor rate to APR?

You need three numbers: the cash you actually receive, the payment amount, and the number of payments. Solve for the rate per payment period that makes those payments equal the cash received, then multiply by the number of periods in a year. A spreadsheet's RATE function does it in one step.

Is a lower factor rate always the better deal?

No. A 1.20 factor repaid in 6 months is roughly 73% APR. A 1.30 factor repaid in 18 months is roughly 36% APR. The lower factor costs fewer dollars but more per year. Which is better depends on how long you need the money.

Does paying off early save money?

With an interest-bearing loan, yes. With a factor rate, only if the agreement includes an early payoff discount. Without one, you owe the full payback amount, and paying it faster raises your effective APR.

Why do funders quote factor rates and not APR?

Revenue-based financing has no fixed term, so a true APR cannot be known in advance. A factor rate is also a smaller-looking number. Several states now require an APR or estimated APR on these offers anyway.

What is a typical factor rate?

It varies by funder, by the strength of the business, and by the payback period. Ask for your specific factor rate, the estimated term, and every fee in writing, then run the numbers.

Factor Rate vs APR: What a 1.30 Factor Really Costs

The short version

Factor rate is a multiplier. Multiply it by the amount you receive and you get the total you repay.

APR is the yearly cost of the money, counting how long you actually have it.

The two measure different things. A factor rate measures total dollars. APR measures cost over time. You need both.

Why a 1.30 factor is not 30% interest

Take $100,000 at a 1.30 factor rate. You repay $130,000. The cost is $30,000.

With 30% interest on a normal loan, you pay interest only on what you still owe. As the balance falls, so does the interest.

With a factor rate, the $30,000 is fixed on day one. You pay it on the full $100,000 even though you start returning that money in the first week. Halfway through, you have had the use of far less than $100,000, but the cost has not moved.

That is why the yearly rate comes out much higher than the factor suggests.

Conversion table

A $100,000 advance, repaid in equal weekly payments, with no fees.

Factor rate	6 months	9 months	12 months	18 months	24 months	36 months
1.15	55%	37%	28%	19%	14%	9%
1.20	73%	49%	37%	25%	19%	12%
1.30	107%	72%	54%	36%	27%	18%
1.40	139%	94%	70%	47%	36%	24%

Read across any row. The dollars are identical in every column. Only the speed of repayment changes. Paybacks through our marketplace run from 6 to 36 months. A longer payback lowers the APR on the same dollars and keeps you paying for longer; it does not make the money cheaper.

Daily payments return the money slightly faster than weekly ones, so the APR on a daily schedule runs a little higher than these figures.

Two things that push the APR higher

Fees

Many funders take an origination fee out of the advance. You repay the full amount but receive less.

At a 1.30 factor over 12 months with a 3% fee, you receive $97,000 and repay $130,000. The APR moves from about 54% to about 61%.

Paying faster than planned

If your agreement has no early payoff discount, finishing early does not save a dollar. Our guide to early payoff discounts shows what a discount is worth.

Repay that same 1.30 advance in about 8 months and the cost is still $30,000. The APR climbs from about 54% to about 80%.

Five questions to ask before you sign

What is the total payback in dollars?
What fees come out of my advance, and what do I actually receive?
What is the APR or estimated APR?
What is each payment, and how often is it collected?
Is there a discount if I pay off early?

If a funder will not put those five answers in writing, treat that as your answer.

When a high APR can still be the right call

APR is a yearly rate. You may only need the money for a few months.

The practical test is in dollars. If $100,000 costs $30,000, what will that $100,000 earn?

Inventory you can sell at a markup that clears $30,000 with room to spare: it can work.
A large order you would otherwise turn down: it can work.
Covering payroll during a slump with no plan to recover the cost: it will make things worse.

Speed has value too. A cheaper loan that arrives after the opportunity is gone is worth nothing. Just make sure you are paying for speed on purpose.

Your right to see the number

As of March 2026, ten states had commercial financing disclosure laws: California, Connecticut, Florida, Georgia, Kansas, Missouri, New York, Texas, Utah, and Virginia. California requires providers to state the price as an APR.

Outside those states, a funder may not volunteer an APR. Ask anyway.

How we calculated this

For each example we found the weekly rate at which the stream of equal weekly payments equals the cash received. We multiplied that rate by 52. This is a standard nominal APR. Months were converted at 26, 39, 52, 78, 104, and 156 weeks. Figures are rounded to the nearest whole percent.

Real revenue-based financing collects a share of sales, so payments vary and the true rate is only known once the payback is complete. Treat these as estimates.

Sources

Kapitus: Revenue-Based Financing, checked October 9, 2026
Venable LLP: State Commercial Financing Disclosure Laws, March 2026