Every merchant cash advance has a factor rate. It's the single most important number in your offer, because it sets what you'll pay in total.
The formula
- Total payback = advance × factor rate
- Cost of the funding = total payback − advance
- Total cost = cost of the funding + fees
Three examples on a $50,000 advance
| Factor rate | Total payback | Cost of the funding |
|---|---|---|
| 1.20 | $60,000 | $10,000 |
| 1.30 | $65,000 | $15,000 |
| 1.40 | $70,000 | $20,000 |
Add any fees to the cost of the funding to get your total cost.
A factor rate is not an interest rate
An interest rate applies to a balance that shrinks as you pay it down. A factor rate applies once, to the full advance, and the total is set from day one. So a factor rate of 1.30 is not the same as 30% interest.
Because most advances finish in under a year, the equivalent annual cost is higher than the factor rate suggests. Faster repayment doesn't lower the total unless your agreement says so.
How to compare offers
Ask every funder the same questions:
- What is the advance, and how much will actually be deposited after fees?
- What is the total payback?
- What is every fee, and when is it charged?
- What share of my sales goes to repayment, and how is it collected?
- About how long will it take to finish?
- Will you fund me if I already have an advance?
At RPI, every one of these answers appears in your offer before you sign.
See it for yourself: the MCA calculator does this math instantly. Move the factor rate slider and watch the total payback and total cost change.
These examples are for illustration only and are not RPI pricing. Your factor rate depends on underwriting.