MCA
Factor Rate vs APR: How to Compare Funding Offers
A 1.28 factor is not 28 percent a year. The arithmetic every operator should run before signing anything.
May 2, 2026 · 6 min read
What a factor rate actually says
Multiply the amount advanced by the factor rate to get total payback. $100,000 at 1.28 means $128,000 delivered. The factor says nothing about time — and time is what determines true cost.
The same 1.28 over six months is roughly twice as expensive in annualized terms as 1.28 over twelve.
Converting to an annualized number
A workable estimate: total cost divided by amount advanced, divided by the term in months, multiplied by twelve, then adjusted upward for declining balance. On $100,000 at 1.28 over eight months, $28,000 of cost annualizes to roughly 42 percent simple and materially higher on an APR basis.
Where state disclosure law applies, the funder must show an estimated APR. Read it and use it.
Compare four numbers, not one
Total payback, expected term, total fees, and daily or weekly debit. Any offer can be made to look attractive on a single dimension. Together the four are difficult to disguise.
Also confirm early-payoff treatment. Some advances discount for early delivery; many do not, which makes accelerating repayment economically pointless.