Turn a factor rate into a cost you can compare
Enter the advance and then either the factor rate or the total repayable. Edit either one and the other updates. The calculator shows the cost, the indicative APR-equivalent over your expected term, and how that stacks up against a business loan at 12% APR. Indicative only, not a quote.
The APR-equivalent is an indicative comparison figure only. A factor rate has no time dimension, so the same rate annualises differently depending on how quickly you clear. All figures are indicative.
These figures are indicative. Funders quote your exact factor rate against your card statements.
Side by side with a business loan at 12% APR
The same amount, over the same term, priced as an amortising business loan at a representative 12% APR. Indicative comparison only.
| Indicative comparison | Merchant cash advance | Business loan at 12% APR |
|---|---|---|
| Amount advanced | £25,000 | £25,000 |
| Term | 9 months | 9 months |
| Cost of borrowing | £7,500 | £1,267 |
| Total repaid | £32,500 | £26,267 |
| Repayment shape | Flexes with card sales | £2,919 fixed each month |
| Difference in cost | The advance costs £6,233 more over the same term | |
The loan column assumes a straight amortising facility with equal monthly instalments and no fees. Real business loan pricing varies with credit, security and lender.
What a factor rate is, and why it is not an interest rate
A factor rate is a flat multiplier applied once. Advance multiplied by factor rate gives the total repayable, and that number never moves. An interest rate does the opposite: it accrues against whatever balance is outstanding, so as you pay down a business loan the interest charge falls with it. That single difference explains almost every surprise businesses report about a merchant cash advance.
The practical consequence is that speed does not save you money. Clear a 1.30 advance in five months instead of eleven and you still pay the same 30% of the advance in cost. On a business loan, clearing it in five months instead of eleven would roughly halve the interest. If you want the mechanics in full, our guide to factor rate versus APR works through where the two diverge.
Reading a quote backwards
Funders do not always lead with the factor rate. Some quote you an advance and a total repayable and leave you to work out the rest. That is what the two-way field on this calculator is for: type the total the agreement says you owe, and it tells you the factor rate the funder is actually charging. A £40,000 advance repaying £52,000 is a factor rate of 1.30 and £12,000 of cost, whatever the paperwork calls it.
Do the same check on the fees. Ask whether the factor rate is the whole cost or whether an arrangement or origination fee sits alongside it, because a 1.25 with a 3% arrangement fee is really closer to a 1.28. Add any such fee to the total repayable before you type it in here, and the calculator will give you the effective factor rate rather than the advertised one.
What drives the rate you are offered
Card sales volume and consistency do most of the work. A funder is buying a share of your future card sales, so twelve months of steady takings through the same terminal is the strongest thing you can show. Advance size matters too, since larger advances tend to attract lower factor rates. Sector risk, trading history and how long the funder expects repayment to take all feed in, and bad credit tends to raise the rate rather than block eligibility outright, because the card takings carry more weight than the credit file.
Comparing like with like
The table above is deliberately blunt. On cost alone, a business loan at a representative APR will usually beat a merchant cash advance over the same term, and pretending otherwise helps nobody. What the table cannot show is the rest of the decision: speed to funds, whether you would qualify for the loan at all, whether you can carry a fixed instalment through a quiet month, and whether the working capital is going to earn more than it costs. Our comparison of a merchant cash advance versus a business loan covers those trade-offs properly.
Once you know what a fair factor rate looks like for your business, compare the market before signing. Our roundup of the best merchant cash advance providers in the UK shows who funds what, and the merchant cash advance calculator converts a factor rate into an actual repayment term once you add your holdback and monthly card takings.
Factor rate calculator FAQs
How to calculate a factor rate?
Divide the total repayable by the amount advanced. If you are advanced £25,000 and the agreement says you repay £32,500, the factor rate is 32,500 divided by 25,000, which is 1.30. Running it the other way, advance multiplied by factor rate gives the total repayable, so £25,000 at 1.30 is £32,500. The calculator on this page works in both directions.
What is a 1.1 factor rate?
A factor rate of 1.1 means you repay £1.10 for every £1 advanced, so the cost is 10% of the advance regardless of how long it takes to clear. On a £50,000 advance that is £5,000 of cost and £55,000 repayable. A 1.1 is at the cheap end of the UK market and generally goes to businesses with strong, steady card sales and a solid trading history.
What is a factor rate?
A factor rate is a flat multiplier that fixes the total cost of a merchant cash advance on the day you sign. Unlike an interest rate it does not accrue against a reducing balance, so it does not fall if you repay quickly and does not rise if repayment drags on. UK factor rates on a merchant cash advance typically run from about 1.10 to 1.50 depending on card sales, sector, advance size and eligibility.
How to convert factor rate to APR?
There is no exact conversion, because a factor rate has no time dimension and an APR is entirely about time. The usual approximation is to take the cost as a share of the advance, then annualise it over the expected repayment term: cost divided by advance, multiplied by 12 divided by the term in months. A £7,500 cost on £25,000 over nine months gives an indicative APR-equivalent of about 40%. Treat it as a comparison figure only.
Is a factor rate the same as APR?
No, and comparing them directly will mislead you. A factor rate of 1.30 sounds like 30%, but if that advance clears in six months the annualised cost is nearer 60%, and if it takes eighteen months it is nearer 20%. The same factor rate produces wildly different APR-equivalents depending on the term, which is exactly why funders quote factor rates instead.