A factor rate is the cost multiplier on a merchant cash advance, and it is not random. Funders set it based on how risky they judge your business to be, which means you have real influence over it.
The main factors funders 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 — see MCA stacking
Why risk drives the number
A factor rate, often somewhere between roughly 1.1 and 1.5, prices the funder'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, which is also what funders look for in your bank statements. 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 funders, which can improve the rate.
What rate can I get for a merchant cash advance?
Nobody can tell you a number before seeing your bank statements, and any funder who quotes one first is guessing. What decides it is your monthly deposit volume and how consistent it is, how long you have been trading, your credit profile, your industry, and how much existing advance debt you are already carrying. Those five inputs set the rate.
The most useful thing to understand is which of them you can still move. Deposit consistency is the heaviest input and the most fixable in the short term — a run of clean months with no negative days changes how a file reads more than almost anything else. Existing advances are the next lever, because a stacked file prices worse regardless of how strong the revenue underneath it is. Time in business you cannot accelerate, but it does mean a rate quoted at eight months and the same business at eighteen months are genuinely different propositions, which is sometimes an argument for waiting rather than negotiating.
What you cannot do is shop your way to a rate your file does not support. What you can do is make sure you are seeing the best rate your file does support, which is a different problem and a solvable one — the same business routinely gets materially different offers from different funders because each prices risk its own way. This is also where getting the comparison right matters: a lower factor over a shorter term can cost more per day than a higher factor over a longer one, so read how a factor rate works and compare total payback rather than the multiplier alone.
Does a better factor rate mean a cheaper advance?
Not necessarily, and this is the most common expensive mistake. A factor rate sets total payback but says nothing about fees deducted at funding or how many days you have to repay. A 1.28 with a 3% origination fee over six months can cost more in practice than a 1.32 with no fee over twelve.
Two offers are only comparable once you reduce both to net cash received, total dollars repaid, and days to repay. It is worth doing that arithmetic before signing rather than after: in the Federal Reserve Banks' 2025 Small Business Credit Survey, 60% of firms that borrowed from online lenders reported that their actual borrowing costs came in higher than expected, compared with 32% of large-bank borrowers. Getting total payback in writing is what keeps you out of that number.
Let the right funders on the rate
The same business can get noticeably different factor rates from different funders, because each prices risk its own way. The Broker Shop is a broker, not a funder: we send your file to the funders whose guidelines you meet so you see the lowest rate you actually qualify for.
Checking your options is free and won't affect your credit score.
Frequently asked questions
Once you have a quoted factor rate, the factor rate to APR calculator shows what it actually costs annualized.
See what you qualify for
One 2-minute application is matched to the funders whose guidelines you meet. 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 the right funders for the lowest rate.