Two pricing languages, one business decision. Here is how factor rates actually work, how they compare to APR, and the 30-second way to judge any offer.
Half the confusion in business funding comes down to two pricing languages talking past each other. Banks speak APR. Advances speak factor rates. Neither is lying to you, and neither tells the whole story alone. Once you can read both, every offer in this industry becomes a 30-second judgment call.
A factor rate is a fixed multiplier. Take $50,000 at a 1.25 factor and you pay back $62,500, period. Not interest that accrues over time: a fixed payback known on day one, collected as a set daily or weekly remittance. That fixed-ness is the whole appeal of a merchant cash advance: no rate resets, no compounding, no surprises, and a yes that arrives in hours because the math is simple for everyone.
Convert that 1.25 factor over a six-month term into an APR and you get a number near 90 percent. Scary, and also not the number you pay. APR annualizes; a six-month product borrows the money for half a year. You pay $12,500 on $50,000, exactly as quoted, whether the APR math looks pretty or not.
The reverse mistake is just as common: judging a long-term loan only by its low APR while ignoring that ten years of 9 percent adds up to far more total dollars than six months of a 1.25 factor. Time is the variable that makes the two languages incomparable.
The honest comparison is always three numbers together: total cost in dollars, the payment against your weekly cash flow, and how long you carry it. Our true-cost calculator does that math for any offer in seconds.
Amortizing loans charge interest as time passes, so paying early saves money. A factor payback is fixed, so paying early usually does not shrink the bill unless the contract includes a prepay discount. Some funders offer real ones, and it is worth asking for before you sign. This is exactly the kind of line item our guide on reading a funding offer teaches you to spot.
Deposit strength, account consistency, time in business, industry, and how many positions you already carry. Which means the rate is not fixed in the stars: a cleaner file gets a lower factor, and strengthening your file for even a month before applying pays for itself. Stacked positions push factors the wrong way fast, one more reason consolidation often saves more than people expect.
If those three numbers work, the offer works, whatever language it was quoted in.
Want your real number instead of a hypothetical? Apply here, statements upload in the app, and we quote you actual offers with the total cost spelled out. Straight answer, usually within a day. Or call or text (848) 420-8444.
Send us your positions and we will run the real math, free. One straight answer about whether consolidation gives your business room to breathe, with no pressure either way.