The short answer
At a glance
| Factor rate | Multiplier on the amount funded; total payback is fixed |
|---|---|
| Interest rate | Charged on the remaining balance; falls as you pay down |
| APR | Yearly cost including fees; useful for loans, harder to apply to advances |
| Total payback | Amount funded x factor rate, or principal plus all interest and fees |
| Total cost | Total payback minus the cash you actually receive |
| Payment frequency | Daily, weekly or monthly; changes cash flow, not total cost |
| SBA rate structure | Typically a base rate plus a spread capped by SBA rules |
| Rule of thumb | Compare total dollars and term, never the payment alone |
Before you apply: checklist
- Write down the amount funded and the cash you receive after fees
- Find the total payback in the contract
- Subtract to get the total cost in dollars
- Count the number of payments and their size
- Ask whether paying early reduces the cost
- Run the same numbers for every offer you have
- Check the payment against your slowest month
Check what your business qualifies for
Merchant Fund Express reviews funding costs, factor rates and rates requests from $5,000 to $5,000,000. Scores from 500 are considered, and same-day decisions are common on complete files.
Check funding options with Merchant Fund ExpressFactor rate vs interest rate vs APR
Factor rate. Common on merchant cash advances. A 1.25 factor on $40,000 means $50,000 back, period. Paying early usually does not lower that unless the contract offers an early payoff discount.
Interest rate. Used on loans and lines. Interest builds on what you still owe, so paying down faster lowers the total.
APR. Annual percentage rate wraps interest and fees into a yearly figure. Because short-term advances are repaid in months, their APR can look very high even when the dollar cost is manageable. Look at both. For a product-level comparison, see revenue-based financing vs MCA.
Illustrative example: total payback and effective cost
| Step | Figure |
|---|---|
| Amount funded | $40,000 |
| Assumed factor rate | 1.25 |
| Total payback ($40,000 x 1.25) | $50,000 |
| Total cost ($50,000 minus $40,000) | $10,000 |
| Assumed term | About 168 business days (8 months) |
| Daily payment ($50,000 / 168) | About $297.62 |
| Cost per $1 funded ($10,000 / $40,000) | $0.25 |
| Cost per month ($10,000 / 8) | $1,250 |
If the money earns more than $1,250 a month in profit, the funding pays for itself. If it does not, the amount or the term needs rethinking.
These figures are illustrations, not offers. Real pricing, amounts and terms depend on the full file review.
Calculator walkthrough
- Enter the amount you want.
- Enter the factor rate or the rate and fees from your offer.
- Enter the term and payment frequency.
- Read total payback, total cost and payment size.
- Change one input at a time to see what moves the cost most. Usually it is the term and the rate, not the frequency.
Not sure what amount to plug in? Start with how much can I borrow.
Funding brings customers. Is your website ready for them?
Funding usually pays for growth: more stock, staff, equipment or marketing. Make sure the customers that growth brings find a website that explains what you do and makes it easy to call, book or buy. Cheap Cheap Websites builds professional sites from $399, with Website Care at $30/month.
Glossary of funding terms
- Holdback: the share of sales or fixed amount taken to repay an advance.
- Origination fee: a fee taken from or added to the amount funded.
- Net funding: cash that actually lands in your account.
- Position: each open advance on your account; first, second and so on.
- Renewal: new funding offered before an existing one is fully paid.
- Prepayment terms: what happens to the cost if you pay early.
- SBA rate: typically a base rate plus a lender spread, capped by SBA rules.
Common mistakes
- Choosing the offer with the smallest daily payment and the biggest total cost.
- Ignoring fees taken out before funding.
- Comparing an APR on one offer with a factor rate on another.
- Assuming early payoff saves money on an advance without checking.
How Merchant Fund Express handles this
Merchant Fund Express shows the amount, total payback and payment schedule so the cost is clear before you sign. Try the Merchant Fund Express funding cost calculator to model your own numbers, then apply with Merchant Fund Express for a real offer based on your statements.
Related
Cheap Cheap Websites builds websites. It does not lend or make funding decisions. Funding is offered by our funding partner, Merchant Fund Express, and every request is subject to its review and approval. Figures on this page are illustrations, not offers. Updated October 16, 2026.