A factor rate represents the discount taken by the MCA provider buying your future revenue. Because MCAs are advances of future revenues — and not loans — no interest is involved.
The rate varies but generally falls somewhere between 1.1 and 1.5. The MCA provider will determine your specific rate based on a number of variables, including consistent monthly revenue, no negative balance days, and other debt obligations. For example, if the MCA provider advances you $10,000 with a 1.2 factor rate, you will be expected to ACH $12,000 over the agreed purchase period. The faster you agree to remit the purchased receivables , the lower your factor will be.