The factor rate is the whole price — almost
Unlike a loan with an interest rate, an MCA is priced with a factor rate: a multiplier applied to the advance amount. If you take a $50,000 advance at a 1.30 factor rate, you repay $65,000. That $15,000 spread is the funder's entire return — no amortization schedule, no compounding interest.
The typical factor-rate range in 2026:
| File quality | Typical factor range | What $50K costs |
|---|---|---|
| Strong (consistent deposits, first position, healthy balance) | 1.20–1.30 | $60,000–$65,000 repaid |
| Average (solid revenue, some position or blemishes) | 1.30–1.45 | $65,000–$72,500 repaid |
| Stretched (stacked positions, variable revenue, recent defaults) | 1.45–1.50+ | $72,500+ repaid |
These are market-typical ranges, not promises — your offer is priced off your file. But they give you the frame: every tenth of a factor point on $50K is $5,000. That's why "1.30 vs. 1.45" sounds like a rounding difference and costs like a used car.
The term trap: same rate, wildly different cost
Here's what the factor rate doesn't show you: speed of repayment. A $50,000 advance at a 1.30 factor repays $65,000 whether it takes 3 months or 12. Pay it back in 3 months and you're paying $15,000 for 90 days of capital. Stretch it over 12 and the same dollars buy you a year.
Translated into APR-equivalents (estimated via daily-payment IRR — methodology varies by calculator, which is itself part of the problem):
| Advance | Factor | Repaid | Term | APR-equivalent* |
|---|---|---|---|---|
| $50,000 | 1.30 | $65,000 | 3 months | ~763% |
| $50,000 | 1.30 | $65,000 | 6 months | ~196% |
| $50,000 | 1.30 | $65,000 | 9 months | ~106% |
| $50,000 | 1.30 | $65,000 | 12 months | ~73% |
*APR-equivalents are estimates computed from daily-debit internal rate of return. Different calculators and disclosure laws use different methods — that's exactly why you should compare total dollars repaid, not any single percentage.
The pattern matters more than the numbers: the faster the debit schedule, the more expensive the same factor rate becomes. A short-term advance with aggressive daily debits is the most expensive capital in this table — which is why the holdback percentage (next section) deserves as much attention as the rate.
The fee stack: what lives outside the factor rate
The factor rate covers the funder's return. These charges often don't:
- Origination / underwriting fees — commonly 1–5% of the advance, sometimes deducted before funding. A $50K advance with a 3% origination fee puts $48,500 in your account while you repay on $50K.
- ACH / processing fees — small per-debit charges that add up across hundreds of daily debits.
- NSF / missed-debit fees — charged when a daily debit fails, and a bad week can stack them.
- Default / collection fees — the contract's penalty tier. Some contracts also include confession-of-judgment or UCC provisions — legal leverage, not line items, but they're part of the true cost if things go wrong.
- Renewal and evergreen clauses — some contracts auto-renew or add fees for early payoff. Read the last page before the first.
When a funder quotes you, ask for one number in writing: the total dollars that leave your account over the life of the deal. Factor-rate math plus every fee. Anything less is a headline, not a quote.
What actually moves your price
Funders price risk. The levers, in roughly this order:
- Position — first-position advances price best. A second or third advance on the same revenue is priced for the risk of the stack: expect 1.45+.
- Revenue consistency — steady deposits beat spiky ones. A funder prices your worst month, not your best.
- Time in business and bank health — 2+ years, no chronic overdrafts, no recent bounced debits to other lenders.
- Industry risk — restaurants, trucking, and construction price wider than medical practices and professional services, on average.
- Holdback percentage — the share of each day's deposits the funder takes. A lower holdback costs you less per day but extends the term (see the term trap above) — negotiate the total dollars, not just the rate.
How to compare two MCA offers in 60 seconds
Put both offers through this filter:
- Total dollars repaid — factor × advance + all fees. Lower wins.
- Daily/weekly debit amount — can your average week (not your best week) absorb it with room to run the business?
- Term and early-payoff terms — is there a discount for paying early, a penalty, or an evergreen clause?
- What the contract secures — personal guarantee? UCC filing? Read the guarantee and judgment sections before the signature page.
If a funder won't give you these four things in writing, that's the answer. Walk away.
The disclosure gap — and how to close it yourself
New York, California, and Virginia require funders to give standardized APR-style disclosures on commercial financing before you sign. Most states don't — Texas, Florida, and the majority of the country leave comparison entirely to you.
Your move, in any state:
- Demand the disclosure or cost summary in writing anyway. Legitimate funders provide it; it's the reluctant ones you're screening for.
- Run the factor math yourself: advance × factor + fees = total repayment. Never sign a number you haven't computed.
- Get 2–3 offers on the table at once. Funders bid against each other only when there's a bid to beat.
For the broader picture of how MCAs compare to term loans and lines of credit, see MCA vs. term loan and MCA vs. business line of credit.
Know your number before you sign
Get a no-obligation quote from our #1-ranked lender, Coast to Coast Fast Funding — total repayment dollars in writing, multiple funders compared, so you see the actual market for your file.
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