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APR calculator: compare factor rates, fees and interest rates

Put two offers side by side, priced however the provider quoted them. The calculator finds the APR from what you actually receive and what you repay, and shows the total cost in dollars.

Offer A

Factor rate Interest rate

Amount financed ($) Factor rate Annual interest rate (%)

Number of payments Paid

Up-front fees taken from the funds ($)

Estimated APR: –
Payment: –
You receive: –
Total repaid: –
Total cost of the money: –
Cost per $1 received: –
Term: –

Offer B

Factor rate Interest rate

Amount financed ($) Factor rate Annual interest rate (%)

Number of payments Paid

Up-front fees taken from the funds ($)

Estimated APR: –
Payment: –
You receive: –
Total repaid: –
Total cost of the money: –
Cost per $1 received: –
Term: –

APR here is the periodic rate that makes your payments equal the money you actually receive, times payments per year (about 252 business days, 52 weeks, 26 fortnights or 12 months). For merchant cash advances the real term moves with your sales, so treat the APR as an estimate. How it's calculated

Short answer

APR is the yearly rate at which your payments are worth exactly the money you receive. For example, a $50,000 advance at a 1.30 factor rate, minus a $1,000 fee, repaid in 126 business-day payments, has an estimated APR of about 118%, while a $50,000 loan at 11.5% over 36 months with a $1,500 fee has an APR of about 13.6%.

How it's calculated

For each offer the calculator works out the payment, what you actually receive and what you repay:

Interest-rate loan: payment = P × r / (1 − (1 + r)^−n), r = annual rate ÷ payments per year Factor-rate product: payback = advance × factor; payment = payback ÷ n You receive = amount − up-front fees

Then it finds the periodic rate i that makes the payments worth exactly what you receive:

you receive = payment × (1 − (1 + i)^−n) / i APR = i × payments per year

It solves for i numerically (bisection, to well under a hundredth of a percent). Payments per year are about 252 for business days (weekdays minus federal holidays), 52 weekly, 26 every two weeks and 12 monthly.

What APR does and doesn't tell you

APR is the best single number for comparing the price of money across products and terms. It doesn't tell you the total dollars you'll pay (shown separately), whether the payment fits your cash flow, or what the guarantee and default terms say. A shorter loan can cost fewer total dollars with a higher APR, which is why the calculator shows both.

Worked check

The default inputs reproduce the example in the short answer. Offer A: $50,000 at 1.30, $1,000 fee, 126 business-day payments of $515.87, you receive $49,000 and repay $65,000, so the cost is $16,000 and the APR about 118%. Offer B: $50,000 at 11.5% for 36 months, $1,500 fee, payments of $1,648.80, you receive $48,500 and repay about $59,357, so the cost is about $10,857 and the APR about 13.6%. These figures are covered by automated tests against independently computed values.

Limits

Real merchant cash advance remittances vary with sales; the APR is an estimate.
Variable-rate loans change with the index; the calculator uses today's rate for the whole term.
Fees paid at closing out of your own pocket rather than deducted from the funds have the same economic effect; enter them as up-front fees.

Sources

Questions people ask

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

Because a factor rate is a fixed charge per deal, not per year, and because you start repaying immediately, so on average you hold much less than the full amount. $15,000 of cost on $50,000 sounds like 30%, but repaid daily over six months it's roughly 109% a year.

Is this the same APR a lender must disclose?

It uses the same idea (the actuarial method: periodic rate times periods per year). State disclosure laws have detailed rules, such as how to estimate the term of a sales-based product, so a provider's disclosed figure can differ somewhat. Large differences are worth asking about.

Why does fewer payments mean a higher APR for the same factor rate?

The dollar cost is the same but you have the money for less time. Paying $15,000 to use money for three months is a higher yearly price than paying it for a year.

What should I enter for an MCA with a percentage of sales?

Use the provider's estimated daily or weekly payment and the estimated number of payments. Then try a faster and a slower case to see the range, because your real term will follow your sales.