Resource
MCA Factor Rates Explained
How factor rates are calculated and why they aren't the same as an interest rate.
A factor rate is a fixed decimal — typically between 1.10 and 1.50 — that a funding provider applies to the advance amount to determine the total amount you'll repay. Unlike an interest rate, a factor rate doesn't accrue over time or change based on how quickly you repay.
The math is simple: total payback amount = advance amount × factor rate. A $50,000 advance at a 1.35 factor rate means $67,500 is owed in total, whether it's repaid in three months or eight.
Why it's structured this way
Because an MCA is a purchase of future receivables rather than a loan, factor rates sidestep the interest-rate framework entirely. That's part of why MCAs fall outside some of the regulations that govern traditional loans — and why it's worth reading terms carefully rather than assuming familiar loan math applies.
Factor rates are typically set based on the provider's assessment of risk: time in business, revenue consistency, industry, and the requested amount all play a role. Backstone doesn't set factor rates or disclose provider criteria — those are determined by the funding provider you're matched with.