Factor rates and APRs measure cost differently, which makes offers hard to compare. Enter the advance, the factor rate, and the estimated term to get an approximate APR for the advance.
Key takeaways
- APR annualizes cost so offers compare fairly.
- fee = advance × (factor − 1).
- Shorter term → higher APR for the same factor rate.
- Estimate only; exact APR depends on the schedule.
- From $10,000, FICO 500+ considered.
Why convert to APR
APR annualizes cost, so it lets you line up a short-term advance next to a longer term loan. A fixed fee that looks small over 6 months can be a large APR once annualized.
The math (approximate)
A simple estimate: fee = advance × (factor − 1); APR ≈ (fee ÷ advance) ÷ (term in years) × 100. For example, $30,000 at 1.35 over 6 months is a $10,500 fee, roughly a 70% estimated APR. This is an approximation — actual APR depends on the exact payment schedule.
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Use it to negotiate
If two offers have the same factor rate but different terms, the shorter one carries a higher APR. Converting both to APR shows the true cost gap so you can pick the cheaper capital.
Frequently asked questions
Is this the exact APR?
It's a close estimate. The precise APR depends on the daily/weekly payment schedule and any fees, but this is accurate enough to compare offers.
Why is the APR so high?
Short terms annualize a fixed fee into a large percentage. That's normal for advances — the tradeoff is speed and flexible qualification.
Which is better, factor rate or APR?
Neither is 'better' — they measure different things. Use total cost in dollars for what you pay, and APR to compare speed-adjusted cost.
