# Funding costs cheat sheet: factor rates , interest and APR

URL: https://cheapcheapwebsites.com/cheat-sheets/funding-costs/
Updated October 16, 2026. Funding offered by Merchant Fund Express (https://merchantfundexpress.com/funding-cost-calculator/); Cheap Cheap Websites builds websites and does not lend.

## The short answer
A factor rate is multiplied by the amount funded to get a fixed total payback, so $40,000 at 1.25 means $50,000 repaid. An interest rate charges on the balance you still owe, and APR expresses the yearly cost including fees. The simplest fair comparison is total payback minus amount received, divided by how many months you have to pay it.

## 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

## Factor 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
Illustrative example 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 .

## 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.

## Frequently asked questions
**What is a good factor rate?** There is no single good number. Pricing depends on revenue stability, credit, time in business, existing positions and term. Compare the total cost in dollars to what the money will earn, and compare at least two offers.

**Why is APR on an advance so high?** APR annualizes the cost. A cost paid over a few months looks large when stretched to a yearly figure. The dollar cost and the payment size are often more useful for deciding whether an advance fits.

**Does paying early save money?** On a loan with interest, usually yes. On a factor-rate advance, the total payback is fixed unless the contract offers an early payoff discount. Always ask before you sign.

**How are SBA loan rates set?** SBA loan rates are typically a base rate plus a spread, and SBA rules cap the spread. The exact rate depends on the lender, loan size and term. SBA loans usually take weeks to months and need more paperwork.

**Does a weekly payment cost less than daily?** Not by itself. Frequency changes how the cost hits your cash flow, not the total. A weekly schedule can be easier to plan around for some businesses.

Apply with Merchant Fund Express: https://merchantfundexpress.com/current-application.html?utm_source=cheat-sheet&utm_campaign=funding-costs