Factor Rate Calculator: Convert a Factor Rate to an Interest Rate
Also called: factor rate to APR calculator, factor rate converter, merchant cash advance calculator.
Quick answer
This factor rate calculator turns a factor rate into a total to repay, a cost per dollar and two annual rates, one simple and one by the repayment schedule, so you can set the offer beside an interest rate. It is arithmetic for planning, not a quote.
See what a factor rate costs as an annual rate.
A 1.20 factor means every dollar advanced costs $1.20 to repay. Because repayments start straight away, the annual rate by the repayment schedule is well above 20 per cent.
The amount the factor applies to, before any fee comes out of it.
Example factor 1.20 as at 27 September 2026, not an offer. Change it to the factor you have been quoted. Terms run from 1 to 24 months.
Fees deducted from the advance, such as an establishment fee. You receive less and repay the same total, so the annual cost rises.
Daily means business days: 5 a week, 260 a year.
- Weekly repayment
- $1,153.85
- Total to repay
- $60,000
- Simple annual rate
- 20.0%
- Annual rate by schedule
- 37.0%
$1,153.85 a week for 52 weeks on $50,000 advanced at the 1.20 example factor over 12 months: $60,000 to repay, a cost of $10,000. That is 20.0 per cent a year simple and about 37.0 per cent a year by the weekly schedule.
Estimates only. This calculator is not a quote, an offer or an approval. It converts the factor and figures you enter into annual rates; neither rate is a regulated comparison rate, and the lender's contract decides the actual cost and repayments. Nick Lim is an FBAA Accredited Finance Broker with Switchboard Finance.
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How do you convert a factor rate to an interest rate?
Multiply the amount by the factor to get the total to repay, take the amount away to get the cost, then turn that cost into a yearly rate in one of two ways: simply, by spreading it over the term, or by the repayment schedule, which counts that you start repaying straight away.
What a factor rate is, and why it is quoted as a decimal, sits in our glossary entry on factor rates. This page does the conversion; the worked conversion example walks through the 1.20 case step by step.
Total to repay = amount × factor. Cost = total − amount. Simple rate = cost ÷ amount × 365 ÷ days. Schedule rate = i × repayments a year, where amount = repayment × (1 − (1 + i)−n) ÷ i and n is the number of repayments.
What is the simple annualised rate?
The simple annualised rate is the cost divided by the amount, divided by the term in days, times 365. It treats the whole amount as borrowed for the whole term, which is why it is the lower figure: on $50,000 at a 1.20 factor over 12 months it is 20.0 per cent.
What is the annual rate by the repayment schedule?
The schedule rate is the rate per repayment period that makes the equal repayments add back to the amount advanced, multiplied by the number of repayments in a year. It comes from the standard amortisation formula in the Reserve Bank of Australia's Research Discussion Paper 2021-10, Appendix A, solved for the rate instead of the repayment; the calculator finds it by bisection, halving the gap between a rate that is too low and one that is too high until they meet. On the same $50,000 repaid weekly it is about 37.0 per cent. The calculator assumes:
- Repayments are equal and made in arrears, the first one a period after the money is advanced.
- Daily means business days, 5 a week and 260 a year; weekly is 52 a year, fortnightly 26 and monthly 12.
- The number of repayments is the term in months × repayments a year ÷ 12, rounded to the nearest whole repayment.
- The term in days is months × 365 ÷ 12, rounded down, so 6 months is 182 days and 12 months is 365.
- The schedule rate is nominal: the rate per period × repayments a year, without compounding.
- Fees taken up front lower the amount you receive and feed only the annual cost with fees; fees charged later, such as dishonour fees, are not included.
What does a 1.1, 1.2, 1.3 or 1.4 factor rate cost annualised?
A 1.20 factor costs about 37.0 per cent a year by a weekly schedule over 12 months and about 72.8 per cent over 6 months; over 12 months a 1.10 factor is about 19.0 per cent and a 1.40 factor about 70.5 per cent. The table runs four factors over three terms on both methods.
| Factor | Cost per $1 | 6 months, simple | 6 months, by schedule | 12 months, simple | 12 months, by schedule | 18 months, simple | 18 months, by schedule |
|---|---|---|---|---|---|---|---|
| 1.10 | $0.10 | 20.1% | 37.4% | 10.0% | 19.0% | 6.7% | 12.8% |
| 1.20 | $0.20 | 40.1% | 72.8% | 20.0% | 37.0% | 13.3% | 24.8% |
| 1.30 | $0.30 | 60.2% | 106.6% | 30.0% | 54.1% | 20.0% | 36.3% |
| 1.40 | $0.40 | 80.2% | 138.9% | 40.0% | 70.5% | 26.7% | 47.2% |
Sources: schedule rates solve the amortisation formula in RBA Research Discussion Paper 2021-10, Appendix A (rba.gov.au, November 2021, read 27 September 2026) for the weekly rate, multiplied by 52; simple rates are cost ÷ amount × 365 ÷ days (182, 365 and 547 days). Arithmetic on the factor alone: equal weekly repayments in arrears from the first week (26, 52 and 78 repayments), no fees, nominal rates rounded to one decimal place. The factors are examples, not quotes or offers, and no figure here is a regulated comparison rate.
Two patterns hold across the table: for weekly repayments the schedule rate is close to double the simple rate, and halving the term roughly doubles the annual rate for the same factor. To set a factor rate offer against finance priced as an interest rate, start with our working capital loans page; whether a factor rate counts as an interest rate at all is answered in the short term business loans guide.
Why do two calculators give different answers?
Two calculators give different answers on the same offer because they annualise the cost by different methods: one spreads it over the term as if you held the whole amount throughout, the other follows the repayment schedule, where what you owe falls from the first repayment.
Online converters usually print one figure each. Some divide the cost by the term, some solve the repayment schedule, and some add fees to give an APR-style figure. Each can be arithmetic done correctly; they answer different questions, which is why the gap can be close to double on a short loan repaid weekly.
| Method | How it is worked out | Annual rate | What it assumes |
|---|---|---|---|
| Simple annualised | Cost of $10,000 ÷ $50,000 × 365 ÷ 365 days | 20.0% | The whole $50,000 is held for the whole year |
| By the repayment schedule | Weekly rate that makes 52 repayments of $1,153.85 equal $50,000, × 52 | 37.0% | The balance falls with each weekly repayment |
| Schedule with a fee taken up front | Same 52 repayments against $48,500 received after a $1,500 fee, × 52 | 43.5% | Less is received on day one for the same repayments |
Sources: Switchboard arithmetic on a $50,000 advance at a 1.20 factor, 52 weekly repayments in arrears; schedule method from the amortisation formula in RBA Research Discussion Paper 2021-10, Appendix A (rba.gov.au, November 2021, read 27 September 2026). The $1,500 fee is an illustration, not a typical or quoted fee. Nominal rates rounded to one decimal place; none is a regulated comparison rate.
Compare the schedule rate with a bank's interest rate, because a bank rate is also charged on a balance that falls as you repay. An annual percentage rate folds known fees into the same yearly figure, which is what the calculator's annual cost with fees does. None of the three is a regulated comparison rate; whether a business loan has to show one is covered in the guide to working capital loan costs.
Does early repayment save anything on a factor rate?
Usually not: the total to repay is set when the money is advanced, so paying out early generally saves nothing unless the contract offers a written discount or rebate, and it lifts the annual rate you actually paid because the same cost covers less time. What to ask for before you sign is in paying out a flat fee business loan early, and the costs guide's early payout answer covers the same point for flat fee offers.
What else do people ask about converting a factor rate?
How do I convert a factor rate to APR?
Work out the cost, which is the amount times the factor minus one, then annualise it by the repayment schedule and include any fee taken from the advance; that gives an APR-style annual cost. The calculator does both steps, and the result is not a regulated comparison rate.
What is a 1.2 factor rate as an interest rate?
About 37.0 per cent a year by a weekly repayment schedule over 12 months, or about 35.1 per cent repaid monthly, against 20.0 per cent on the simple method. Over 6 months the same 1.20 factor is about 72.8 per cent a year by a weekly schedule.
Do fees change the annual cost?
Yes, a fee taken out of the advance means you receive less but repay the same total, so the annual cost rises. On $50,000 at a 1.20 factor over 12 months repaid weekly, a $1,500 fee lifts the schedule rate from about 37.0 to about 43.5 per cent a year.
Which annualised figure should I compare with a bank rate?
Compare the schedule rate, because a bank interest rate is charged on a balance that falls as you repay, which is what the schedule rate measures. The simple figure treats the full amount as owed for the whole term, so it understates the cost of a short loan repaid from the first week.
Is this calculator a quote?
No, it is arithmetic on the figures you enter and an example factor; the lender's contract decides the actual cost and repayments. Send your figures through the enquiry form if you want an offer checked against what else is available.