Factor Rate to APR Calculator
Convert your merchant cash advance factor rate into a true APR based on your actual payment schedule.
How to use this calculator
A merchant cash advance is priced with a factor rate rather than an interest rate, which means the annual rate isn't stated anywhere in your agreement — it has to be calculated from your actual payment schedule. This calculator does that using the same time-weighted method behind consumer lending disclosures. Here's what each input does:
Original Funded Amount. The gross amount of your advance, from your funding agreement. If an origination fee was withheld, your deposit was lower — use the funded amount, not the deposit, since that's what your payback was calculated against.
Factor Rate or Total Payback. Enter whichever your agreement states. A factor rate is multiplied by your funded amount to produce your total payback. If your agreement states the total payback directly, you can enter that instead — the calculator works backward to the equivalent factor rate.
Payment Amount. The exact amount debited from your business bank account each payment. You can read this straight from your online business banking or statements.
Payment Frequency. Daily or weekly, matching your remittance schedule. Daily payments run Monday through Friday, so a year holds about 260 payments rather than 365 — and that timing is exactly what the APR calculation is based on.
Origination Fee. Optional, defaults to zero. If there was an origination fee, enter it here — it reduces the cash you actually received and raises your true APR. Most conversion tools ignore this entirely.
The results show your true APR, your total cost of capital in dollars, your total payback, the amount you actually received, and your effective term.
Why your factor rate isn't your interest rate
A 1.20 factor rate on $100,000 means you repay $120,000. Your cost is $20,000, and that number is fixed the moment you're funded. It doesn't accrue, and it doesn't change.
But a $20,000 cost of capital on $100,000 with a 12-month term is not 20% a year. It would be if you held the full $100,000 for the full year and repaid everything in one payment at the end. That's not how a merchant cash advance works. Repayment starts almost immediately — typically the next business day or the following week, depending on whether the structure is daily or weekly — and continues on that schedule until the balance is cleared.
Both numbers describe the same advance. The $20,000 is what it costs you. The 37.5% is that same cost expressed as a yearly rate, given how quickly you paid it back. For how factor rates are set and what moves them, see our Working Capital Calculator.
How your true APR is calculated
Most factor-rate conversion tools use a shortcut, and it understates the answer. The shortcut divides your total cost by your funding amount and annualizes it by the term — $20,000 ÷ $100,000 over twelve months gives 20%. That figure assumes you keep the funder's capital for the entire term and settle up at the end. You don't. You begin returning it within days of funding.
This calculator models the schedule you actually pay. It accounts for the amount that reached your account, every scheduled payment, and the timing of each one, then solves for the annual rate at which those payments repay what you received. That's the internal-rate-of-return method — the same approach used in consumer lending disclosures.
Payment frequency changes the math, not just the rhythm. Daily payments are collected Monday through Friday, so a year holds about 260 payments rather than 365. Weekly payments hold 52. The calculator uses whichever schedule you select, because the timing of your payments is exactly what APR measures.
An origination fee raises your APR without changing your payback. If a $100,000 advance carries a 3% fee withheld at funding, $97,000 reaches your account but you still repay $120,000. Your cost of capital is unchanged at $20,000 — but you received less, and your true APR rises from 37.5% to 44%. Most conversion tools ignore this entirely. If a fee was withheld from your funding, enter it.
Why your APR disclosure shows a number this high
Most merchant cash advance borrowers never receive an APR disclosure. There's no federal requirement for one, and ordinary business-purpose financing sits outside the federal consumer lending disclosure system. About a dozen states have commercial financing disclosure laws in force — but only two of them currently require an APR figure.
California and New York are those two. California's SB 1235 was the first law of its kind in the country, with disclosure requirements taking effect in December 2022 and administered by the Department of Financial Protection and Innovation. A follow-on law, SB 362, took effect January 1, 2026 and tightened things further — including restricting how providers can use the words "interest" and "rate" when discussing pricing. New York's Commercial Finance Disclosure Law has required an estimated APR since 2023, and Vermont will join them in July 2027. Whether a law applies generally depends on where your business is managed, not where your lender is located.
Other states have their own commercial financing disclosure laws, though they generally disclose total dollar cost rather than an annualized rate, and some don't cover sales-based advances at all.
If you received one, the figure is often higher than borrowers expect. A 1.35 factor rate repaid over nine months produces an APR near 84%. A business owner who understood the cost as "35%" opens the disclosure and finds a figure more than twice that, with no explanation attached to it.
That figure comes from the same calculation described above, applied to a shorter term. Duration is doing most of the work: repaying the same cost over nine months rather than eighteen roughly doubles the annualized rate, even though the dollars leaving your account are identical. The same arithmetic runs the other way — a shorter term also means the cost is behind you sooner. Short-term financing mathematically produces high APRs.
The disclosure exists so you can compare financing options on one common measure. California's own form says directly that APR is not an interest rate, and that the cost is based on fees set at funding rather than interest accruing over time. The point of the figure is to let you compare other financing products using an APR figure.
What APR tells you, and what it doesn't
APR tells you how your financing is priced. It's a comparison instrument. It adjusts for time, which is the one thing a factor rate can't do on its own, and it lets you set a merchant cash advance next to other financing products based on an APR. On most state disclosures it's labeled an estimate, because actual repayment can vary.
Cost of capital tells you what the financing costs. It's contractual, fixed at funding, and knowable to the dollar. It's also the number you actually pay. You never make payments based on a percentage rate.
Your payment schedule tells you whether the business can carry it. A daily or weekly debit is a cash flow event, not a pricing event, and it's often what determines whether an advance works for a business — independent of what either of the other two numbers said. If you're carrying more than one position, our Merchant Cash Advance Debt Calculator shows your combined payment amounts and when each position clears.
Each number answers a different question, and none of them answers all three. Reading APR as the price overstates what you'll pay. Reading cost of capital alone understates the role of time — a $35,000 cost repaid over nine months and the same $35,000 repaid over twenty-four months are different arrangements, and only the annualized rate makes that visible. Used together, they describe the financing accurately.
Reading your results
Total Cost of Capital. What the advance costs you in dollars — the gap between what you repay and what you were funded. Fixed at funding.
True APR. That same cost expressed as an annual rate, adjusted for how quickly you repay it and for any fee withheld at funding.
Total Payback Amount. Your funding amount multiplied by your factor rate. The all-in figure you'll repay across the term.
Amount Actually Received. Your funding amount less any origination fee — the cash that reached your account. This is the figure your APR is calculated against, which is why the fee matters.
Effective Term. How many payments it takes to satisfy the balance, shown in the frequency you selected.
Factor Rate. Shown alongside the dollar figures so you can connect the multiplier to what it produces.
Your cost of capital is set at funding and does not decrease as you repay. Paying early generally does not reduce it, unless your agreement includes a prepayment discount — some do, and it's worth confirming before you sign. If you already have an advance and want to know where you stand today, our Merchant Cash Advance Payoff Calculator shows your remaining balance and payoff date.
Frequently Asked Questions
Common questions about how the calculator works and what the numbers mean.
A factor rate is a multiplier applied once to your funding amount to set your total payback. A 1.20 on $100,000 means you repay $120,000, and that figure is fixed at funding. An APR expresses that same cost as an annual rate, accounting for how quickly you repay it. Both describe the same financing — the factor rate gives you the total, the APR gives you the rate that total works out to over time.
Because repayment begins almost immediately. A 1.20 factor rate puts your cost at 20% of what you were funded, and that would also be your annual rate if you kept the full amount for a year and settled at the end. Since repayment starts within days of funding, or the following week on a weekly schedule, the same $20,000 cost works out to roughly 37.5% annualized. Terms shorter than twelve months push the figure higher.
From your actual cash flow: the amount that reached your account, every scheduled payment, and the timing of each one. The calculation solves for the annual rate at which those payments repay what you received — the internal-rate-of-return method used in consumer lending disclosures. Daily payments are counted on business days, roughly 260 a year, since that's when they're collected. Weekly payments are counted at 52 a year.
Some states require a provider to give you a written disclosure before you sign, showing cost and payment terms. About a dozen states have commercial financing disclosure laws in force, but only California and New York currently require an APR figure — Vermont joins them in July 2027. The rest disclose total dollar cost instead, and some don't cover sales-based advances at all. There is no federal requirement. Whether a law applies generally depends on where your business is managed rather than where your lender is located.
Yes. An origination fee is withheld at funding, so less cash reaches your account while your payback stays the same. On a $100,000 advance at a 1.20 factor rate with a 3% fee, $97,000 is deposited but you still repay $120,000. Your cost of capital is unchanged at $20,000, but your APR rises from 37.5% to 44%.
It's one of three figures worth looking at. APR tells you how the financing is priced and lets you compare it against other products on a common measure. Cost of capital tells you what you'll pay in dollars. Your payment schedule tells you whether the business can support it. Each answers a different question.
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