How to read a factor rate.
1.28 is not 28% APR. Here’s the conversion, why the gap matters, and how to compare a factor-priced product against an APR loan without fooling yourself.
What a factor rate is
A factor rate is a flat multiplier on the amount borrowed. Multiply it by your advance to get total repayment. A 1.28 factor on $50,000 means you repay $64,000 — period. No compounding, no separate interest accruing over time.
Factor rates appear on merchant cash advances and revenue-based financing. APRs appear on amortizing loans. They are not interchangeable, and a factor is never an APR.
Converting to a real cost
The trap: 1.28 looks like 28%, but the true annualized cost depends entirely on how fast you repay. The same factor costs far more over six months than over eighteen.
| Factor | Term | Cost of capital | Approx. APR |
|---|---|---|---|
| 1.28 | 18 months | 28% of principal | ~34% APR |
| 1.28 | 6 months | 28% of principal | ~95% APR |
Same factor, same dollar cost — wildly different APR, because you’re repaying it in a third of the time. The dollars don’t change; the speed does.
Comparing to an APR
To put a factor-priced offer next to an APR loan, convert both to total cost of capital in dollars, then to an APR over the actual term:
- Total repaid = amount × factor.
- Cost of capital = total repaid − amount.
- Annualize: divide the cost by the amount, then by the term in years.
- Compare that figure to the loan’s APR — apples to apples.
Some brokers quote only the factor because it looks smaller. Emet shows the factor, the dollar cost, and the equivalent APR on every factor-priced offer — and our cost compare tool does the math for you.
- 01A factor is a flat multiplier — amount × factor = total repaid.
- 02The same factor’s APR swings hugely with the repayment term.
- 03Always convert to dollars and to an APR over the real term before comparing.
- 04If someone quotes only a factor, ask for the dollar cost and the APR.
See the real cost, side by side.
Every offer we bring back shows the factor, the dollars, and the equivalent APR — so you can compare honestly.