Factor Rate to APR. The conversion that matters.
A 1.30 factor rate isn't 30% interest — it's typically 50%–90% APR depending on payback period. This converter shows you the real number, plus a comparison matrix across common terms.
Your inputs: (1.30 − 1) ÷ (6 ÷ 12) × 100 = 60.0%
Factor rate × payback period = effective APR
The same factor rate produces wildly different APRs depending on payback speed. A 1.30 factor over 12 months is 30% APR — reasonable. The same 1.30 factor over 3 months is 120% APR — among the most expensive small business financing on the market. Always compare on APR, not factor rate.
| Factor rate | 3 months | 6 months | 9 months | 12 months | 18 months |
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Factor rates obscure true cost on purpose.
An MCA quote will say "1.30 factor rate" because that sounds like 30% — in the same range a credit card hits during the worst part of an introductory promotional cycle. But factor rates are not annualized rates. A 1.30 factor on a 6-month payback is a 60% APR. On a 3-month payback, it's a 120% APR.
This is why five states (NY, CA, UT, VA, CT) now require MCA APR disclosure under their commercial finance disclosure laws. The remaining 45 states still permit factor-rate-only quoting at the offer stage, which is a deliberate choice to keep cost comparisons hard.
The math, in one sentence
Effective APR = (factor rate − 1) ÷ (payback period in years) × 100. That's it. The factor minus one gives you the cost percentage; dividing by the payback period in years annualizes it; multiplying by 100 puts it in percentage terms. A 1.40 factor over 9 months: (0.40) ÷ (0.75) × 100 = 53.3% APR.
What's a reasonable APR for an MCA?
Most legitimate MCAs land in the 50–110% APR range when computed honestly. Below 40% is exceptional — usually reserved for prime credit borrowers with strong revenue. 40–80% is the lower-mid tier, generally a good outcome for the average small business. 80–130% is the upper-mid tier, common for less-than-prime credit. Above 130% APR, you're in the most expensive corner of the market — usually because the factor rate is high and the payback period is short.
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