The basic formula
Multiply the amount funded by the factor rate to get the total repayment. Subtract the amount funded to get the dollar cost. With a 1.3 factor, the cost is always 30 percent of the amount funded, regardless of how long repayment takes, because the total is fixed when you sign.
Total repaid = amount funded × factor rate
Dollar cost = amount funded × (factor rate − 1)
Example: $25,000 at 1.3 means $32,500 repaid and a $7,500 cost. $50,000 means $65,000 repaid and $15,000. $100,000 means $130,000 repaid and $30,000. These amounts illustrate the arithmetic only; they are not offers, and a 1.3 factor is not presented here as a typical rate.
Fees change what you really receive
If fees are deducted at funding, you receive less cash but still repay the full factor amount. Divide the dollar cost plus fees by the cash you actually receive for the real cost per dollar. Always check the agreement for fees that are separate from the factor rate.
Real cost per dollar = (total repaid − cash received) ÷ cash received
Example: a $50,000 advance at 1.3 carries a $1,500 fee deducted at funding, so $48,500 is deposited. Total cost is $65,000 − $48,500 = $16,500. Cost per dollar received rises from 30 cents to about 34 cents. Illustrative figures. The full method is in the true-cost worksheet.
| Repayment period | Approx. business-day payment | Cost per dollar per month | Rough annualized estimate |
|---|---|---|---|
| 6 months | about $516 | 5.0 cents | about 120% |
| 9 months | about $344 | 3.3 cents | about 80% |
| 12 months | about $258 | 2.5 cents | about 60% |
Why the term changes the real cost
The factor fixes the dollar cost, but the term decides how much you pay for each month you have the money. Divide cost per dollar by the months of repayment. A shorter term also means larger daily or weekly payments, which affects cash flow even though the total is unchanged.
Cost per dollar per month = (factor − 1) ÷ months of repayment
Example: at 1.3, the 30 cents of cost per dollar works out to 5 cents per month over six months, about 3.3 cents over nine months and 2.5 cents over twelve. On $50,000, a six-month term means about $516 per business day (about 126 business days), while twelve months means about $258. The table sets these side by side. Illustrative only.
Why an estimated APR on a factor-rate offer looks high
A factor-rate cost does not shrink as you repay, while your outstanding balance does. On average you only have about half the money for the full term, so the cost relative to the money you are actually using is higher than the 30 percent headline. Annualizing a short term raises the figure further.
Rough estimate: dollar cost ÷ average amount outstanding ÷ years of repayment.
Example: with $15,000 of cost, about $25,000 outstanding on average as $50,000 is repaid evenly, and a half-year term, the rough estimate is $15,000 ÷ $25,000 ÷ 0.5 = about 120 percent a year. Over twelve months, it is about 60 percent. This is a simplified illustration that ignores exact payment timing, not a disclosed APR. If an offer includes a disclosed or estimated APR, use that figure.
Does paying early reduce the cost?
Usually not, because the total repayment is fixed when you sign. Repaying faster just concentrates the same dollar cost into fewer months. Some agreements include an early repayment discount, but whether it exists and how it is calculated is specific to the contract. Read your contract and ask the funder for the exact amount in writing.
If an early repayment discount is offered, compare the dollars saved with what that cash would earn if it stayed in your business. Example: repaying early to save $2,000 does not help if the cash used would have produced $4,000 of gross profit over the same months. Illustrative only.
Is 1.3 high or low? Judge it against what the money earns
Whether 1.3 is worth paying depends on what the money produces and how fast. Compare the dollar cost with the gross profit the funds generate within the repayment period. The same factor can be a good deal for fast-turning inventory and a poor one for a project that pays back slowly.
Example: $50,000 buys goods that sell for $80,000 within four months, a $30,000 gross profit. After the $15,000 cost, $15,000 remains. If the same money funds an investment that produces $2,000 a month and repayment takes six months, only $12,000 of gain arrives during repayment, short of the $15,000 cost. Illustrative figures. Compare with other options on revenue-based financing and inventory funding payback.
Frequently asked questions
How do I calculate the payback on a 1.3 factor rate?
Multiply the amount funded by 1.3 for the total repayment. On $40,000, that is $52,000, so the cost is $12,000. Then divide the total by the number of scheduled payments to find each payment, or multiply a daily payment by the number of business days to confirm it matches the total. Figures are illustrative.
What is a 1.3 factor rate as an APR?
It depends on the term. A rough estimate divides the dollar cost by the average amount outstanding and annualizes it, which in a simplified illustration comes to about 120 percent for six months and about 60 percent for twelve. Actual figures depend on payment timing and fees, so use any disclosed APR in your offer.
Does paying early reduce the cost of a factor rate?
Generally not, because the total repayment is fixed at signing. Some contracts offer an early repayment discount, and the terms vary. Read your contract and ask the funder for the exact amount due at a specific early date, in writing, before assuming any savings.
How do fees change a 1.3 factor rate offer?
Fees deducted at funding reduce the cash you receive while the repayment stays the same. In an illustrative case, a $1,500 fee on a $50,000 advance at 1.3 raises the cost per dollar actually received from 30 cents to about 34 cents. Add every fee before comparing offers.
Is 1.3 a high factor rate?
It cannot be judged in isolation. What matters is the term, the fees and what the money earns during repayment. A 1.3 factor over twelve months costs less per month than the same factor over six, and it can be worth paying if the funds produce clearly more gross profit than the cost.
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Updated September 14, 2026 · Roifunder Funding Team