TreasuryClear
Which financing fits?

What's the real rate behind that quote?

A factoring fee of "2.5%" and a cash advance "factor rate" of 1.4 are both costs written so they don't look like a rate. Type the quote in and get the annual rate it works out to, the way a bank loan would be quoted to you. It runs in your browser, and nothing is sent anywhere.

What were you quoted?

The reserve is returned when the invoice is paid, so the cost is measured against what you actually got.

The real rate

How each number is worked out

Factoring is a bullet cost: the fee is taken once and your money is outstanding for the whole collection period, so the annual rate is the fee against what you were advanced, scaled up to a year. Fee divided by advance, times 365 over the days outstanding. It does not compound, so this is the conservative read.

A merchant cash advance is different, and worse than the factor rate suggests, because you repay a fixed slice every business day from the first day. Your balance falls the whole time, so the real rate is the internal rate of return on that daily payment stream, annualized. That is why a "1.4" can be a triple-digit APR: you never had use of most of the money for most of the term.

This is arithmetic on the numbers you enter, not a quote, an offer, or advice. Your actual terms depend on your business. If a rate here looks high, that is the point: take it to the financing options that price in the teens before you sign anything in the triple digits.

Bar chart comparing an SBA ceiling near 10 percent, invoice factoring around 24 percent, and a merchant cash advance at triple-digit APR.
Why this tool exists: a factor rate and a fee hide the real cost. Converted to an annual rate, the same products line up on one axis and the expensive ones stop hiding. Editorial illustration, TreasuryClear.

A factor rate is not an interest rate

A 1.4 factor sounds like 40%. Repaid over a few months instead of a year, it's an annual rate two to four times that. The math is counterintuitive in exactly the direction that flatters the lender, which is why the number gets quoted as a factor in the first place.

Bar chart comparing the prime rate, the SBA 7(a) ceiling, and factoring shown as an annual rate.
A factoring fee of a few percent per invoice becomes a much larger annual rate once you account for how fast it's repaid. Same money, honest units. Editorial illustration, TreasuryClear. Prime: Federal Reserve H.15.
A person at a desk holding a receipt with one hand pressed to their head, surrounded by paperwork.
The daily remittance on a cash advance is what turns a scary APR into a cash-flow emergency. Seeing the annual rate first is how you avoid signing into one. Photo: Karola G via Pexels. Pexels License.

Use the real rate to shop

The point isn't that every one of these products is bad. It's that you can't compare a factor rate to a bank rate until both are annual. Convert the quote, then hold it against the cheaper doors before you sign.

A semi truck on an open highway with mountains in the distance.
Factoring is normal and often sensible in industries like freight, where invoices pay slow. Even there, knowing the annual cost is how you tell a fair factor from a greedy one. Photo: Omar Gerardo via Pexels. Pexels License.
The Marriner S. Eccles Federal Reserve Board building in Washington under a blue sky.
Every honest comparison starts from the prime rate the Federal Reserve publishes. Convert your quote to an annual rate and you can finally measure it against that floor. Photo: AgnosticPreachersKid via Wikimedia Commons. CC BY-SA 3.0.