A factor rate is the cost multiplier on a merchant cash advance, and it is not random. Lenders set it based on how risky they judge your business to be, which means you have real influence over it.
The main factors lenders weigh
Your factor rate reflects a handful of risk signals:
- Monthly revenue and how consistent your deposits are
- Time in business
- Personal and business credit
- Your industry and its stability
- Existing advances or debt
Why risk drives the number
A factor rate, often somewhere between roughly 1.1 and 1.5, prices the lender's risk into a single multiplier. Stronger, steadier businesses look safer to repay, so they earn rates near the low end. Newer or higher-risk profiles carry rates toward the top.
Because there is no compounding, the rate is locked at signing, so the inputs that set it are worth getting right before you apply.
What you can do to lower it
The most effective lever is showing healthy, consistent revenue with no negative days. Adding time in business, reducing existing debt, and keeping your account clean all push the rate down. Even a couple of strong months before applying can help.
Borrowing a sensible amount relative to your revenue also reassures lenders, which can improve the rate.
Let lenders compete on the rate
The same business can get noticeably different factor rates from different lenders, because each prices risk its own way. The Broker Shop sends your file to 50+ competing lenders so you see the lowest rate you actually qualify for.
Checking your options is free and won't affect your credit score.
See what you qualify for
One 2-minute application reaches 50+ competing lenders. It's free, and checking your options won't affect your credit score.
See What I Qualify For →The bottom line: Your factor rate is priced from risk, revenue, time in business, credit, and industry, so strengthen those inputs and let lenders compete for the lowest rate.