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What does this working capital offer really cost?

Estimate total cost and an annual rate from a factor rate, fees, and term. Compare two offers.

What changes your real cost

  • Whether paying early lowers what you owe. Many factor-rate deals have a fixed total, so ask.
  • Fees taken out of the amount, which leave you with less cash than the amount offered.
  • Whether the provider holds back part of the amount or debits other charges.
  • Whether payments are daily, weekly, or monthly. More frequent payments mean you hold the money for less time.

Your numbers

How long you repay.

Payment schedule

Estimate

Example only

Estimated annual rate

about 90%

Estimate for comparing offers. Disclosed rates can differ.

Hypothetical offers. Not real offers or typical rates.

Want to see other options? Send one financing request.

Assumptions and sources

  • Payments. Payments are equal and run the whole term. No early payoff discount. As of . Calculation scope.
  • Payment counts. Daily means 252 business days a year, weekly means 52, and monthly means 12. As of . Calculation scope.
  • Estimated annual rate. Cash received is the amount offered minus upfront fees. The estimated annual rate is the rate that makes the payments equal that cash received, stated as a nominal yearly rate (the periodic rate times payments per year). It is for comparison and can differ from a provider's disclosed figure. As of . Calculation scope.
  • Examples. Default factor rates of 1.35 and 1.20 are labeled examples, the same as on the working capital and merchant cash advance pages. Other defaults are examples too. As of . Example.
  • Rounding. Results round only when displayed. As of . Calculation scope.

How the math works

A factor rate is a multiplier set at the start. Multiply it by the amount and you get the total you pay back. Total cost is that total minus the amount, plus any upfront fees. Cost per $1 is the total cost divided by the amount. To get an annual rate, we first work out what you really receive (the amount minus fees). Then we find the rate per payment that makes your equal payments add up to exactly that cash over the term, and we multiply it by the number of payments in a year. Short terms with frequent payments give a much higher annual rate than the same factor rate spread over a longer term, because you hold less of the money for less time.

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Frequently asked questions

What is a factor rate?

A multiplier fixed at the start. A factor rate of 1.20 on $10,000 means repaying $12,000 in total. It does not account for time, which is why the annual rate can look very different. This is a hypothetical example, not an offer. See working capital.

Why is the annual rate so much higher than the factor rate suggests?

Because you repay over a short time, often with daily or weekly debits, and you are not holding the full amount for the whole term. The same cost over a shorter period works out to a higher annual rate.

Will my provider's annual rate match this?

Maybe not. This tool uses a simple method and shows a nominal annual rate. Some states require certain providers to disclose an estimated annual percentage rate with a specific offer, and the method and covered products vary by state. Ask for the provider's own disclosure and the total repayment in dollars.

Do fees matter if the factor rate looks low?

Yes. Fees can be taken out of the money you receive, so you get less cash while the payback stays the same. The FTC has warned about fees that were not clear to small business owners until money was deducted. Enter every fee.

Can a cheaper offer in dollars have a higher annual rate?

Yes. A short-term offer can cost fewer dollars and still have a higher annual rate. That is why the comparison names both. Which one fits depends on how long you need the money and what you can pay.

Is this a loan?

It depends on how the product is structured. Some working capital is a loan and some, like a merchant cash advance, is generally a purchase of future receivables. The tool works the same way for either. See merchant cash advance.

Sources

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