What is a factor rate?

A factor rate is the multiplier that sets your total payback. If you receive $50,000 at a 1.35 factor, you pay back $50,000 x 1.35 = $67,500. Unlike interest, it does not compound and does not shrink if you pay early, so the honest way to read it is as total dollars paid back.

Why is the APR on revenue-based funding so high?

Revenue-based funding has no interest rate; any APR you see is an estimated annualized figure shown only to compare cost against other products. Because the money is repaid quickly, the same dollar cost translates into a large annualized percentage. Judge the deal on total dollars and weekly payment, not the annualized number alone.

When should I avoid revenue-based funding?

Avoid it when you can wait for a cheaper bank-grade product, when the payment would strain your cash flow, or when you already have positions and would be stacking. In the stacking case, consolidation is usually the better move.

Revenue-Based Funding, Explained Honestly

Q: Is revenue-based funding a loan?

No. It is a purchase of a portion of your business's future revenue at a discount. It has no stated interest rate. You receive an amount up front and pay back a larger fixed total over time as a share of, or fixed remittance against, your revenue.

What it actually is, what it really costs in plain dollars, and when it's the right tool — or the wrong one. Written by a broker who gets paid either way, so we can afford to tell you the truth.

Fundangle · independent commercial-finance broker · updated July 2026

On this page

What revenue-based funding is (and why it's not a loan)
What it actually costs — in dollars
Factor rate vs. "APR": how to read the price
When it fits
When to avoid it
Common questions

What revenue-based funding is

Revenue-based funding is a purchase of a portion of your business's future revenue at a discount. It's often called a merchant cash advance (MCA). A funder gives you a lump sum today and buys the right to collect a larger fixed amount out of your future sales, usually as a fixed daily or weekly remittance or a percentage of receipts.

The important part, and the part a lot of sites gloss over: it is not a loan. It has no interest rate and no APR in the way a bank term loan does. That distinction isn't a marketing trick — it changes how the price works, what happens if you pay early, and how the contract is structured. We'll be precise about all three below.

Why we're blunt about this: Fundangle is a broker. We're paid by the funder when a deal closes, so we have no reason to talk you into the most expensive product. When a cheaper option fits, we say so — including "wait, and you'll qualify for something better."

What it actually costs — in dollars

Forget percentages for a second. The only number that matters first is: how many dollars do you receive, and how many do you pay back? Here's a representative example (illustrative, not an offer):

Illustrative example — $50,000 advance

You receive today$50,000

Factor rate1.35

Total you pay back$67,500

Cost of the money$17,500

Over roughly6–9 months

Weekly payment (approx.)$1,730 – $2,600

That $17,500 is the whole cost, stated as dollars. It doesn't compound, and — this is the catch that surprises people — on most advances it doesn't shrink if you pay early. A 1.35 factor means $67,500 whether you take nine months or three, unless your specific contract offers a prepayment discount (some do; ask). That's the opposite of a loan, where paying early saves interest.

Factor rate vs. "APR": how to read the price

You'll see both numbers. Here's how to hold them:

Term	What it means	How to use it
Factor rate (e.g. 1.25–1.45)	The multiplier that sets total payback. $50k × 1.35 = $67.5k.	Multiply to get your true dollar cost. This is the honest number.
Estimated APR	An annualized estimate of cost, shown only to compare against loans. RBF has no real interest rate.	Use only to compare products side by side — never as "the rate."

Because an advance is repaid fast, a modest dollar cost annualizes into a big-looking percentage. A $17,500 cost over four months can pencil out to a triple-digit estimated APR — which is why we quote you dollars and weekly payment first, and treat APR as a comparison tool only. Some state disclosure laws require an estimated APR on the formal offer; when that applies, you'll see it labeled exactly that way.

When revenue-based funding fits

Speed genuinely matters. A time-sensitive opportunity (inventory, a job you need to staff, a gap before a big receivable lands) can be worth the premium. Funding in as little as one business day is real.
You don't qualify for bank-grade yet. Newer businesses or thinner credit files often can't get a term loan or line today. RBF bridges until you season into cheaper products.
The return beats the cost. If $50,000 today produces more than the $17,500 it costs, the math works. Do that comparison honestly.
Revenue is steady enough to carry the remittance without choking day-to-day operations.

When to avoid it

You can wait. If a bank term loan or SBA option is within reach in a few weeks, the cost difference is large. We'll tell you when waiting wins.
The payment would strain cash flow. A remittance you can't comfortably carry turns a growth tool into a hole.
You'd be stacking. Taking a new advance on top of existing positions compounds cost and risk fast. If you already have one or more positions, the smarter move is usually consolidating what you have, not adding to it.
Anyone promises you approval or a guaranteed rate. No one can — only the funder decides, after review. Treat guarantees as a red flag.

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Common questions

Is revenue-based funding a loan?

No. It's a purchase of future revenue at a discount, with no stated interest rate. That's why the price is a factor rate and a dollar total, not an APR.

What's a factor rate?

The multiplier that sets total payback. Receive $50,000 at 1.35, pay back $67,500. It doesn't compound, and usually doesn't shrink if you pay early.

Why does the APR look so high?

RBF has no interest rate; any APR is an estimated annualized figure for comparison only. Fast repayment makes a reasonable dollar cost annualize into a large percentage. Judge the deal on dollars and weekly payment.

Can I pay it off early to save money?

Usually the payback is fixed regardless of speed, unless your contract has a prepayment discount. Always ask before signing — some funders offer one.

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