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BUSINESS FINANCING GLOSSARY

Factor Rate

A pricing multiple (e.g. 1.25×) used for MCAs and some revenue-based financing instead of an interest rate. You repay the advance times the factor — convert it to APR to compare honestly.

Go deeperFactor rate to APR ▸

Related terms

Effective APR→The true annualized cost of financing priced as a factor rate or fee, once you account for how fast it’s repaid. Short paybacks make low-looking factor rates expensive.Buy Rate→In an MCA, the base factor rate a funder sets before any broker markup. The difference between the buy rate and your rate is the broker’s commission.Interest Rate→The percentage charged on the outstanding principal of a loan, separate from fees. Combine it with fees to get the true cost — the APR.

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