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Factor rates and APRs are different math wearing similar clothes. Here is how to convert between them and compare any two offers on equal footing.
Two funding offers land in your inbox. One quotes 18% APR. The other quotes a 1.25 factor rate. Which is cheaper? Until you can answer that in under a minute, you're negotiating blind — and some brokers count on it.
What each number means
APR (annual percentage rate) expresses cost as a yearly rate applied to a declining balance. As you pay a term loan down, interest accrues on less principal — so the total interest is less than the rate times the original amount.
A factor rate is a flat multiplier on the advance. Borrow $100,000 at a 1.25 factor and you repay $125,000 — full stop. The cost doesn't shrink as you pay down, because it was fixed at signing.
Why factor rates look smaller than they are
That $25,000 on $100,000 looks like "25%". But if you repay it over 6 months rather than a year, the annualized cost is far higher than 25% APR — you had use of the money for half as long. The shorter the term, the more the equivalent APR climbs. This is the single most misunderstood number in small business finance.
The three-question comparison
1. What is the total payback in dollars — every fee included? 2. Over how many weeks or months? 3. What's the payment cadence — daily, weekly, monthly?
Two offers reduced to those three answers can be compared directly, whatever units they were quoted in. Our loan comparison tool does this math for you with standardized SMART Box disclosures.
What we show you
Every Full Send Funding offer states the total payback amount in plain dollars before you sign — cost of capital runs 7.9% to 45% depending on your profile, with terms from 4 months to 3 years. If a competing offer won't give you the three answers above in writing, that tells you something too.