A factor rate is a payback multiplier
If a provider advances $50,000 at a 1.45 factor, the stated payback is $72,500. The financing cost is $22,500.
That arithmetic is easy. The part a factor rate does not tell you is the time value of the money.
Paying $22,500 to use $50,000 for five years is very different from paying $22,500 to use it for eight months.
Why simply annualizing the markup is still incomplete
A rough calculation might divide the financing cost by the amount advanced and then scale it to one year. That is useful as a warning signal, but fixed daily or weekly repayment starts returning principal almost immediately.
A better APR-equivalent estimate solves for the periodic rate implied by the actual payment stream.
For example, using equal business-day payments:
- Amount advanced: $50,000
- Factor rate: 1.45
- Total payback: $72,500
- Term: about 8 months
FundingRank's payment-stream calculation produces an estimated nominal APR-equivalent around 119% before additional withheld fees.
This is an estimate, not a lender disclosure. Variable remittances, skipped payments, prepayment provisions and the exact payment calendar can change the result.
Upfront fees make the economics worse
If an offer says $50,000 but a $2,500 origination fee is withheld, you do not receive $50,000. You receive $47,500 while the repayment obligation may still be calculated from the larger amount.
That is why FundingRank's calculator separates gross funding amount from net cash received.
What to compare
Do not compare factor rates alone. Put each offer into the same framework:
- Cash you actually receive
- Total dollars you must repay
- Number and frequency of payments
- Term
- Upfront fees
- Prepayment terms
Then compare the APR-equivalent, total cost and cash-flow burden side by side.
The cheapest-looking number on the first page of an offer is not always the cheapest money.