Factor rate calculator
An advance is quoted as a factor rate. A loan is quoted as an annual rate. This turns one into the other so you can compare them on the same line.
- You receive after fees
- $48,500
- $1,500 in fees deducted
- You repay in total
- $65,000
- $16,500 more than you received
- Each business day
- $516
- 126 debits
- Equivalent annual rate
- 123%
- The rate a loan would need to carry to cost the same, given the fees and the daily or weekly schedule. Simple annualised cost: 68%.
How to read the result
The factor rate tells you how much you repay. It does not tell you what the money costs, because it ignores two things: the fees that come off the top, and the fact that you start giving the money back the next business day. A $50,000 advance at 1.30 over six months repays $65,000. Take off a 3 percent origination fee and you received $48,500. You hold that money for an average of three months, not six, and pay $16,500 for the privilege. As an annual rate that is far beyond what the figure 1.30 suggests.
None of this makes an advance the wrong choice. For a short, specific purpose with a return that clears the cost, speed is worth paying for. It makes an advance the wrong choice when the money is covering a loss, or when a term loan or line of credit would have done the job at a fraction of the price. The number on this page is how you tell the two apart.
Questions about factor rates
Why is the equivalent annual rate so much higher than the factor rate?+
A factor rate is applied to the whole amount for the whole term and never falls as you repay. A 1.30 factor over six months means paying 30 percent for money you hold, on average, for only three months, and the daily debits start the day after funding. Expressed as an annual interest rate, that is well above 100 percent.
Is the calculator exact?+
It assumes 21 business days a month for daily debits and 4.33 weeks a month for weekly ones, and that fees are deducted before funding. Real offers vary slightly in the day count. The figure is accurate to within a few percentage points of the true cost and far closer than the factor rate alone.
Does Enrichment Capital show this figure on its offers?+
Yes. Every advance offer we present shows the amount, the total repayment, the debit, the number of payments, every fee and the equivalent annual cost, on one page, before you sign.
What is a reasonable factor rate?+
In our network, 1.15 to 1.45 depending on the term and the risk. A shorter term at the same factor costs more per year, not less. Compare offers by their equivalent annual rate and total repayment, not by the factor.
Have an offer in hand?
Send it to us before you sign. We read it, show you the whole number, and tell you whether we can do better or whether you should take it. There is no obligation and no fee to you either way.