A 1.30 Factor Rate Does NOT Mean a 30% Interest Rate

This is something every business owner shopping for financing should understand.

Suppose you’re offered:
$50,000 funded
1.30 factor rate

The basic calculation is:
$50,000 × 1.30 = $65,000 total repayment
You’re paying $15,000 above the amount funded.
But that does not automatically mean the financing has a 30% annual interest rate.

Why?

Because the repayment period matters enormously.
Paying $15,000 to use $50,000 for several years is very different from paying $15,000 to use it for six months.
Factor rates and traditional APR/interest calculations work differently, so don’t compare two offers based solely on the number advertised.
Ask for the funding amount, total repayment, term, payment frequency, fees and prepayment terms.
Then compare the actual economics.
Have you ever received a funding offer quoted using a factor rate?