Factor rate to APR: the conversion nobody shows you
A factor rate and an APR measure different things, which is exactly why comparing an MCA against a loan on the headline numbers misleads in both directions. A factor rate is a fixed multiplier with no time in it; APR is a yearly rate that is all about time. The bridge between them is how fast you repay.
The table below converts common factor rates into approximate equivalent annual rates using a standard rule of thumb: because the balance falls as you repay, the equivalent annual rate is roughly double the simple cost spread over the term (approximate APR ≈ 2 × cost percentage ÷ term in years). It is an approximation for orientation, not a quote — but it is close enough to change decisions.
The conversion table
Read it as: a 1.25 factor repaid over nine months behaves like an annual rate of roughly 67%. The same 1.25 repaid over fifteen months behaves like roughly 40% — the factor did not change, the time did.
| Factor rate (cost) | Repaid in 6 months | Repaid in 9 months | Repaid in 12 months |
|---|---|---|---|
| 1.15 (15%) | ≈ 60% p.a. | ≈ 40% p.a. | ≈ 30% p.a. |
| 1.25 (25%) | ≈ 100% p.a. | ≈ 67% p.a. | ≈ 50% p.a. |
| 1.35 (35%) | ≈ 140% p.a. | ≈ 93% p.a. | ≈ 70% p.a. |
Why the equivalent rate looks so high
Because MCAs are short. Any fixed cost compressed into months annualises to a big number, the same way a £10 fee on a one-week loan of £100 would. The number is still worth knowing — it is the honest basis for comparing an MCA against a 12% APR loan you could actually get and could wait for. What it does not capture: MCAs have no fixed term, repayments fall in quiet weeks, approval reaches businesses banks decline, and money arrives in days. Those features are what the premium buys, and whether they are worth it depends on the plan for the money.
The comparison that decides it is pounds, not percentages: the factor cost in pounds against the interest in pounds on the alternative you can realistically obtain in the time you have. Our worked example runs that comparison end to end.
The two mistakes this table prevents
Treating a factor rate like an interest rate (reading 1.25 as "25% APR") understates the true annual cost by half or more at typical MCA terms. And treating repayment speed as savings: repaying an MCA faster raises its equivalent annual rate because the same fixed cost sat with you for less time, but it saves nothing in pounds. Both mistakes come from carrying loan intuitions into a product that is not a loan.
What you are converting against
The table is only useful next to the alternative you could actually get. Advances sit inside our unsecured panel of 55 lenders, alongside the term loans they are usually compared with. At £25,000, 36 of those lenders have a product covering the amount, over terms from 1 to 72 months, with published floors from 4.1% and a typical floor nearer 19.2% (checked September 2026, spans across panel products rather than offers).
UK factor rates commonly run between 1.1 and 1.5, with established traders at the lower end, as verified in our June 2026 fact-check against published lender material. Put that next to the panel floors and the arithmetic usually points one way for a business that can wait and the other way for a business that cannot. Which one you are is the whole question.
The panel behind this page
Through our broker network we place cases with a panel of 200+ UK lenders offering 1,800+ products, from high-street banks to specialist funds. We check criteria first and approach only the lenders whose requirements you fit. The full roster, category by category, is published in our lender directory.
Frequently asked questions
What is a 1.25 factor rate as an APR?
It depends on repayment speed. As a rule of thumb (equivalent rate ≈ 2 × cost ÷ term in years, because the balance falls as you repay), a 1.25 factor repaid over six months behaves like roughly 100% a year; over nine months roughly 67%; over twelve months roughly 50%. These are approximations for comparison, not quotes.
Why do lenders use factor rates instead of APR for MCAs?
Because an MCA has no fixed term — repayments track card takings, so nobody knows in advance exactly how long repayment will take, which is the input APR needs. A fixed multiplier states the total cost with certainty even though the timing is uncertain. The trade-off is that it makes comparison against APR products harder, which is what this table is for.
Does repaying an MCA early save money?
Usually not — the factor-rate cost is fixed when you sign, so faster repayment shortens the time but not the pounds. Some funders offer early-settlement discounts as a specific feature; if that matters to you, ask for it in writing before signing.
Is CapExpand FCA regulated?
CapExpand Ltd is not directly authorised by the Financial Conduct Authority. CapExpand Ltd (FRN 1060885) is an Appointed Representative of White Rose Finance Group Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 630772). That appointment means White Rose Finance Group Limited is responsible for our credit broking, and both firms appear on the Financial Services Register at register.fca.org.uk. We are a credit broker, not a lender.
Comparing an MCA offer against a loan?
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