Rate Calculator
Factor Rate to APR Calculator
Convert a merchant cash advance factor rate to a true APR using the actuarial method that California and New York require lenders to disclose. It accounts for your term, payment frequency, and any fees, so you can compare an MCA against other funding on equal footing.
Note: this is for merchant cash advances. Invoice factoring is repaid in one collection, so its cost works differently. See the factoring rates guide →
Typically between 1.10 and 1.50 for most MCAs
Most ACH advances debit on weekdays only. This affects the payment count, not the total repaid.
Origination, underwriting, or processing fees deducted before you receive the funds. Leave blank if none.
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APR Reference Table
True (actuarial) APR for common factor rate and term combinations, with no fees and weekday ACH debits. A shorter term means a higher APR even at the same factor rate.
| Factor rate | 6 mo | 9 mo | 12 mo | 15 mo | 18 mo |
|---|---|---|---|---|---|
| 1.15 | 57% | 38% | 29% | 23% | 19% |
| 1.20 | 75% | 50% | 38% | 30% | 25% |
| 1.25 | 92% | 62% | 46% | 37% | 31% |
| 1.30 | 109% | 73% | 55% | 44% | 37% |
| 1.35 | 126% | 84% | 63% | 51% | 42% |
| 1.40 | 142% | 95% | 71% | 57% | 48% |
| 1.50 | 174% | 116% | 87% | 70% | 58% |
Why convert a factor rate to APR?
Apples-to-apples comparison
A 1.30 factor rate sounds cheap until you see it works out to roughly a 160% APR over a 4-month term once you account for how fast you repay. Converting to a true APR lets you compare an MCA directly against a line of credit, short-term loan, or SBA option, all of which quote annual rates.
The term matters as much as the factor rate
A 1.25 factor rate over 2 months is roughly a 270% APR. The same 1.25 factor over 6 months is about 92%. The total dollar cost is identical, but the annualized cost and the cash-flow strain are completely different.
The simple formula understates the real cost
Most calculators divide the factor cost by the term and call it APR. That ignores the fact that you pay the advance down over time, so it understates the true APR by roughly half. This calculator uses the actuarial method that California and New York require lenders to disclose.
How we calculate the APR
This calculator uses the actuarial method (internal rate of return) defined in Regulation Z, Appendix J. It builds your real repayment schedule, solves for the periodic rate that makes those payments equal the cash you actually received, and annualizes it. This is the same method California DFPI and New York DFS require lenders to use when they disclose an MCA APR.
The simple formula many sites use, dividing the factor cost by the term, understates the true cost by roughly half because it ignores that you pay the balance down over the term. The Federal Reserve reached the same conclusion: it found that a 1.20 factor repaid daily over a year works out to roughly 40% even though the fee is only 20% of the principal. For a full walkthrough of the math, worked examples, and how fees change the number, read our guide on how to convert a factor rate to APR.
Sources: Reg Z Appendix J (12 CFR Part 1026), California DFPI commercial financing disclosure regulations, New York DFS 23 NYCRR Part 600, and the Federal Reserve, "Uncertain Terms" (2019).
Frequently asked questions
Related resources
MCA vs. Business Loan
Side-by-side comparison of cost, speed, structure, and when each makes sense.
Merchant Cash Advance Guide
How MCAs work — factor rates, ACH repayment, and what lenders look for.
Break-Even Calculator
See if an advance's cost is justified by the opportunity it funds.
Factor Rate to APR: Full Guide
Why the usual formula understates the cost, worked examples, and how fees change it.