Factor rate calculator

“1.18” looks small on an offer document. On $30,000 it means $5,400, paid back in a matter of weeks. Factor rates are common on short-term online business loans and merchant cash advances because they’re simple to state and the cost is fixed from day one. What they don’t do is tell you how expensive the money is compared with another offer over a different term. Plug the numbers in here and you’ll see the dollars, the size of each debit and a per-month yardstick that puts different offers on level ground.

Inputs: four things from the offer

• Amount advanced ($). The sum the lender pays you. If an origination fee is taken off before funding, use the net amount and treat the fee as part of the cost.
• Factor quoted. The multiplier in the offer, for example 1.25. The calculator won’t accept anything below 1.
• Term (weeks). The repayment period. For a 6-month loan, enter 26; for 12 months, 52.
• Repayments. Daily (business days) or weekly. Daily assumes five debits a week; weekly assumes one.

Outputs: what each line means

Result	Calculation	Use it to…
Total repayable	Amount × factor	Know exactly what leaves your account over the term
Cost of the advance	Total repayable − amount	See the price of the money in dollars
Each repayment	Total ÷ number of repayments, shown “a day” or “a week”	Check the debit against your daily or weekly takings
Cost per $1 per month	Cost ÷ amount ÷ (weeks × 12 ÷ 52)	Compare offers with different terms fairly

The note under the results is the most practical warning on the page: the factor is charged on the full amount up front, so repaying early often saves little. Ask whether an early payout discount applies.

Worked example: a restaurant weighing two short-term offers

A restaurant needs $30,000 to replace a cool room compressor and restock ahead of a busy season. Two offers arrive.

	Offer 1	Offer 2
Factor	1.32	1.18
Term	30 weeks	16 weeks
Repayments	Daily	Weekly
Total repayable	$39,600	$35,400
Cost of the advance	$9,600	$5,400
Each repayment	$264 a day	$2,213 a week
Cost per $1 per month	$0.046	$0.049

Offer 2 is $4,200 cheaper in total, which seems decisive. But measured per dollar per month, it’s actually the slightly dearer money: it costs more for each month you hold it. The choice is really about whether the restaurant can absorb a $2,213 debit each week through to month four, or would rather lose $264 each trading day for seven. If takings are strong now and the busy season is about to start, Offer 2’s shorter, cheaper path may suit. If cash is thin through winter, the daily debit of Offer 1 may be easier to live with, at a higher total cost.

There’s a third question too: would a longer, conventionally priced loan beat both? Run any amortising quote through the loan cost comparison calculator to check.

Holding a factor-rate offer and not sure it’s the best available? Ask a specialist to weigh it up. Asking is free and leaves your credit history untouched.

One factor, very different monthly costs

A factor only becomes meaningful once you know the term. Take 1.25 on $50,000, which costs $12,500 whichever term you choose:

• over 52 weeks, cost per $1 per month works out at about $0.021;
• over 40 weeks (the calculator’s default), about $0.027;
• over 26 weeks, about $0.042.

Same factor, twice the monthly cost at the shorter term. That’s why a lender quoting “1.25 over six months” and another quoting “1.25 over twelve” are making very different offers.

The other subtlety is that the charge is flat. With daily or weekly repayments you’re returning capital from the first week, so on average you hold only about half the advance across the term. A 0.25 cost sounds like a quarter of the amount, but measured against the money you actually have the use of, it’s considerably more. Our glossary page on factor rate explains this in more depth.

Early payout, renewals and stacking

ASIC’s 2018 review of an online lender’s small business contract noted that the lender charged a factor rate for interest on its fixed-term loans, and that because the interest amount was fixed and disclosed at the outset, it sat outside the unfair contract terms review. Fees, though, could still be examined. The lender also agreed to apply a published early prepayment policy. The takeaway for borrowers: the price is locked in when you sign, so the early payout terms and any late or dishonour fees deserve as much attention as the factor.

Watch for two patterns that quietly multiply costs:

1. Renewing halfway through. Topping up an existing factor loan often means the new factor is applied to an amount that includes the unpaid balance of the old one. You can end up paying for the same dollars twice. Ask for the payout figure on the old loan and the net new cash separately.
2. Stacking. Taking a second or third short-term advance from different providers to cover the first one’s repayments. Daily debits pile up fast. If you’re there already, read business loans when you already have online loans.

The RBA’s October 2025 Bulletin observed that short-term unsecured loans are often used to manage temporary cash flow problems, and that lenders expanding unsecured lending tend to price it higher over shorter terms. That’s a reasonable use, as long as the problem genuinely is temporary.

Better-value alternatives to compare against

A factor-priced loan is quick and needs little paperwork, and for a short, clearly defined gap it can be the right tool. Before committing, compare it with:

• a business line of credit, where you pay only for what you draw;
• invoice finance, when slow-paying customers are behind the shortfall;
• a short-term business loan priced on a reducing balance;
• a property-secured loan if you own real estate, which is usually cheaper per dollar over any term.

The merchant cash advance vs business loan head-to-head sets these out, and if you need to get out of an existing advance, see funding to pay out a merchant cash advance.

Signing a factor offer soon? Check it with us first

Factor-priced finance has its place. Still, it’s worth five minutes to check whether a cheaper structure would do the same job, particularly if the debits will run for more than a few months.

Our enquiry form needs roughly sixty seconds, and submitting it runs no credit check at all. Nobody forwards your details to dozens of funders. Instead, someone on our team reads through your need alongside the offer on the table and rings you to discuss it. Fill in the form carefully, including the amount, factor and term you’ve been offered, which lets us say quickly whether anything beats it.

Compare my factor offer with alternatives →