Delancey Street is a premier,  and top rated, merchant cash advance company. If you are looking into getting an MCA for your business we can help. We provide the best rates, best service, and best terms, for merchant cash advances across the USA.
If you’re thinking about getting an MCA, then you need to know about factor rate. This is a huge thing. In this article, we’ll talk to you about the following things.

  • How does a merchant cash advance factor rate work
  • How to understand your mca factor rate
  • How lenders determine your mca factor rate

This article is really focused on trying to educate you about merchant cash advance factor rates, and why it’s confusing. The factor rate is expressed not in %, but as a decimal point. They range from 1.1 to 1.5 – which determines how much you’ll pay back on your loan. There’s a lot of factors that go into a merchant cash advance factor rate, and it’s my goal to educate you in this article.
How does a merchant cash advance factor rate work
If you have a small business and you need short term funding, then a merchant cash advance is a great tool. It can give you quick working capital, fast. It’s essentially a cash advance that is paid back using your daily sales. You’re probably learning more about an MCA at the same time as learning about business loans, lines of credit, etc. Typically, with an MCA, the factor rate will be anywhere from 1.1 to 1.5, depending on your industry, # of years in business, stability of sales, average
How to understand your factor rate
If you’re given a factor rate for your business, you’ll wonder how it was derived.  Factor rate greatly impacts the final amount you pay back.
If you get an advance of $10,000 at a rate of 1.35 for 12 months, then you’ll have to pay back $13,500. You might think that’s great! The interest is 35% of the advance. When a factor is charged though, all of the interested is charged to the principal when the loan is originated. That’s the main difference between you need to know when understanding factor rates and interest rates. APR is used in financing where interested accrues on the principal amount, as the principal gets smaller, and smaller, and more payments are made.
There’s a lot of things to consider when getting an MCA – primarily, the fact they are paid back daily/weekly. If you have a strong sales day, then you’ll pay more that day.
How your factor rate is determined
Below are somethings companies look at when determining your factor rate.
CC Processing Statements: The MCA company will want to see you have a history of credit card sales. That means 3 months of statements.
Business Bank Statements: The lender wants to verify your business’ health.
Years of Business: Most lenders won’t lend you funds unless you’ve been in business for a while.
Tax returns: Some MCA companies will want to see your tax returns to get an idea of your business and how it’s growing.

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