MCA funders hide the true cost of capital behind a small decimal number. Enter your advance details below to see the actual APR, total payback, and daily payment — then decide if your MCA is worth fighting back against.
Enter your MCA details to see the true cost
A factor rate is a decimal multiplier — typically between 1.10 and 1.55 — that a merchant cash advance funder applies to your advance amount to calculate the total repayment. Unlike a traditional interest rate, a factor rate does not decrease as you pay down the balance. The full cost is fixed from day one.
The $17,500 difference is the cost of capital — and you owe it regardless of whether you repay in 4 months or 14 months. This is what makes factor rates so much more expensive than they appear.
With a traditional loan at 10% annual interest, your interest cost decreases as you pay down the principal. Pay it off in 6 months instead of 12 and you pay roughly half the interest. With an MCA factor rate, paying early saves you nothing — the total payback amount is fixed. This is why the effective APR on an MCA is always dramatically higher than the factor rate number suggests.
| Feature | Traditional Loan | MCA Factor Rate |
|---|---|---|
| Cost structure | Interest on remaining balance | Fixed multiplier on original amount |
| Early repayment benefit | Yes - saves interest | No - cost is fixed |
| APR disclosure required | Yes (federal law) | No (not a loan) |
| Cost decreases over time | Yes (amortization) | No |
| Typical APR range | 6% - 30% | 40% - 350%+ |
| Negotiable after signing | Limited | Yes - especially in hardship |
Approximate APR ranges by factor rate and repayment term. Actual APR varies based on payment frequency and exact term length.
| Factor Rate | Risk Label | APR (6 mo) | APR (9 mo) | APR (12 mo) |
|---|---|---|---|---|
| 1.10 | Very Low | ~40% | ~27% | ~20% |
| 1.15 | Low | ~60% | ~40% | ~30% |
| 1.20 | Low-Moderate | ~80% | ~53% | ~40% |
| 1.25 | Moderate | ~100% | ~67% | ~50% |
| 1.30 | Moderate-High | ~120% | ~80% | ~60% |
| 1.35 | High | ~140% | ~93% | ~70% |
| 1.40 | Very High | ~160% | ~107% | ~80% |
| 1.45 | Predatory | ~180% | ~120% | ~90% |
| 1.50 | Predatory | ~200% | ~133% | ~100% |
| 1.55+ | Extreme | ~220%+ | ~147%+ | ~110%+ |
APR estimates use daily compounding. Actual rates vary. This table is for educational purposes only.
Factor rates are not inherently illegal — but they are frequently used in ways that are deceptive, predatory, or legally challengeable. Understanding these tactics is the first step to fighting back.
Unlike banks and credit card companies, MCA funders are not required by federal law to disclose APR. A 1.35 factor rate sounds modest. 140% APR does not. This information asymmetry is intentional.
Many business owners assume paying off an MCA early reduces the total cost. It does not. The full factor rate amount is owed regardless. Some funders even offer 'early payoff discounts' of 5-10% while keeping 90-95% of the cost.
Funders often encourage stacking — taking a second or third MCA while the first is still active. Each advance carries its own factor rate, and combined daily payments can consume 60-100% of daily revenue within months.
Most MCA contracts include a reconciliation clause requiring the funder to adjust payments if your revenue declines. Many funders refuse valid reconciliation requests, potentially breaching their own contract and opening the door to legal defenses.
Not all MCAs are legally untouchable. Courts in multiple states have found that MCAs structured as loans — rather than genuine purchases of future receivables — may be subject to usury laws. The higher your factor rate, the stronger your potential legal position.
At this level, the advance may be recharacterized as a loan in states with active usury enforcement. Review your reconciliation clause and payment history for legal defenses.
Several states cap commercial loan interest rates at 25-36%. If your MCA is recharacterized as a loan, rates at this level may be legally unenforceable in California, New York, and other states.
At 200%+ APR, courts are increasingly willing to examine whether the advance was a true sale of receivables or a disguised loan. Combined with a missing reconciliation clause or COJ, this creates strong grounds for legal challenge and settlement negotiation.
Everything you need to know about MCA factor rates, APR conversion, and your legal options.
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