Learn
What is the real interest rate (APR) on a merchant cash advance?
Last updated
Merchant cash advances don't quote an interest rate — they use a "factor rate" (e.g., 1.3–1.5) applied to the advance amount — but when converted to an annual percentage rate, the true cost is frequently equivalent to triple-digit APRs, often ranging from roughly 40% to well over 300%. Because repayment is collected daily or weekly over a short period, the effective annualized cost is far higher than the factor rate suggests. This gap between the stated factor rate and the real APR is why so many merchants underestimate the cost.
How to estimate your real cost
To estimate your real cost, you have to annualize the total payback against the funded amount and the actual repayment period — not just look at the factor rate. A 1.4 factor rate repaid in four months is a vastly higher APR than the same factor repaid in twelve. Our calculator does this math for you.