What does a 1.3 factor rate actually cost you? What's the true APR? When does an MCA make sense? Every question answered with real numbers.
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An MCA factor rate is a simple multiplier (1.1–1.5x) applied to your advance amount to calculate total repayment. A $50,000 advance at 1.3 factor rate = $65,000 total repayment. Daily payments are fixed ACH debits — not a percentage of sales. Converting to APR: a 6-month repayment term at 1.3x equals roughly 60% APR. MCAs make sense for short-term cash needs, bad credit situations, or when speed matters. For longer-term capital, a working capital loan or line of credit is more cost-effective. Call (305) 384-8391 or apply online.
A factor rate is the pricing mechanism used for merchant cash advances. Unlike an interest rate (which accrues over time), a factor rate is a simple multiplier applied once to your advance amount to determine your total repayment obligation.
The formula is straightforward:
Factor rates typically range from 1.1 to 1.5. The rate you receive depends on your business's risk profile — primarily your revenue consistency, time in business, industry, and credit score.
| Advance Amount | Factor 1.1 | Factor 1.2 | Factor 1.3 | Factor 1.4 | Factor 1.5 |
|---|---|---|---|---|---|
| $10,000 | $11,000 | $12,000 | $13,000 | $14,000 | $15,000 |
| $25,000 | $27,500 | $30,000 | $32,500 | $35,000 | $37,500 |
| $50,000 | $55,000 | $60,000 | $65,000 | $70,000 | $75,000 |
| $100,000 | $110,000 | $120,000 | $130,000 | $140,000 | $150,000 |
| $250,000 | $275,000 | $300,000 | $325,000 | $350,000 | $375,000 |
| $500,000 | $550,000 | $600,000 | $650,000 | $700,000 | $750,000 |
Once the total repayment amount is set, it's divided into fixed daily or weekly ACH debits from your business bank account. The repayment term is determined by how much you can repay each day while maintaining enough cash flow to operate.
Important: MCA daily payments are fixed dollar amounts — they do not fluctuate with your daily revenue (unless you have a true percentage-of-sales MCA, which is less common). Revenue Based Financing at MFE uses fixed daily ACH from your bank account.
The MCA industry quotes factor rates rather than APRs because the cost depends heavily on repayment speed. Here's how to convert:
| Factor Rate | Repaid in 3 Months | Repaid in 6 Months | Repaid in 12 Months |
|---|---|---|---|
| 1.1x | ~40% APR | ~20% APR | ~10% APR |
| 1.2x | ~80% APR | ~40% APR | ~20% APR |
| 1.3x | ~120% APR | ~60% APR | ~30% APR |
| 1.4x | ~160% APR | ~80% APR | ~40% APR |
| 1.5x | ~200% APR | ~100% APR | ~50% APR |
*APR estimates are illustrative. Actual APR depends on specific payment schedule and term. MCA is not a loan and is not required to disclose APR in most states.
Highest weight factor. Higher and more consistent revenue = lower factor rate. Minimum $10K/mo; $50K+/mo gets best rates.
More established businesses get lower rates. Under 1 year: higher rates. 2+ years with strong revenue: best rates.
Secondary factor for MCA. 500+ qualifies. 650+ can unlock lower rates. 550–650 is the typical range for most MCA approvals.
Some industries (restaurants, retail, cannabis) are higher risk = higher rates. Construction, trucking, medical = lower rates.
How much cash you keep in your account matters. Near-zero balances signal cash flow stress and increase factor rate.
Already have an MCA? Stacking (multiple MCAs) increases risk and factor rate. First position gets best pricing.
Better alternatives: Working Capital Loans, Line of Credit, Equipment Financing
| Feature | MFE MCA | Bank Term Loan | Business Line of Credit | Invoice Factoring |
|---|---|---|---|---|
| Speed | Same day–24 hours | 2–8 weeks | 2–5 days | 1–3 days |
| Credit Min | 500+ | 680+ | 500+ | Customer credit |
| Amount | $5K–$500K | $50K–$5M | $10K–$250K | Based on invoices |
| Repayment | Daily/weekly ACH | Monthly | Draw-repay | When customer pays |
| Cost | Factor rate 1.1–1.5x | 7–15% APR | Varies | 1–5%/30 days |
| Collateral | None | Often required | Often required | Invoices |
| Best for | Speed, bad credit, short-term | Long-term, low-cost | Ongoing needs | B2B with slow payers |
A factor rate is a decimal multiplier (1.1–1.5) applied to your advance amount to determine total repayment. $50,000 × 1.3 = $65,000 total to repay.
Most businesses qualify for 1.2–1.4. Strong revenue and credit can get 1.1–1.2. Higher-risk businesses pay 1.4–1.5.
APR depends on repayment speed. A 1.3x factor rate repaid in 6 months is roughly 60% APR. Repaid in 12 months, roughly 30% APR.
Daily payments (smaller amounts, more frequent) typically lead to faster payoff at the same factor rate cost. Weekly payments are larger but less frequent. Choose based on your cash flow rhythm.
Yes, but unlike loans, early payoff usually doesn't reduce the total repayment amount. Ask your MFE rep about early payoff discount options.
MCA is better for speed (24 hours vs. weeks), bad credit (500+ vs. 680+), and no collateral. Term loans are better for long-term capital needs at lower total cost.
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