Short answer: A factor rate is a decimal, usually 1.10 to 1.50, multiplied by the amount funded to give the total repayment. $50,000 at 1.20 = $60,000. The total is fixed upfront and does not grow over time, unlike interest.
The formula
Total repayment = amount funded × factor rate. Cost of funding = total repayment − amount funded.
Example: $50,000 × 1.20 = $60,000 total, so the cost is $10,000.
Worked examples
| Amount | Factor | Total repayment | Cost |
|---|---|---|---|
| $20,000 | 1.15 | $23,000 | $3,000 |
| $50,000 | 1.20 | $60,000 | $10,000 |
| $100,000 | 1.25 | $125,000 | $25,000 |
| $250,000 | 1.18 | $295,000 | $45,000 |
Factor rate vs interest rate
Interest accrues over time, so a longer loan costs more. A factor rate is applied once, so the total is the same whether you repay in 6, 12 or 24 months. A longer term only spreads the same total into smaller payments.
Because of that, a factor rate should not be compared directly with an annual interest rate. Compare the total dollars you repay and the size of each payment.
How payments are calculated
Divide the total repayment by the number of payments. $60,000 over 12 months is about $1,154 per week (52 weeks) or about $238 per business day (about 252 business days).
What affects your factor rate
The lender sets the rate after reviewing your business, including monthly revenue, time in operation, revenue consistency and the amount requested.
Try it yourself
Use the factor rate calculator to see totals and payments for your numbers.
HESPOR Trading Ltd. is an independent introducer, not a lender. This guide is general information, not financial advice.