Card machine loan costs: factor rates and total repayment explained
By Helm, Funding Specialist
- Costs are expressed as factor rates, not APR
- Factor rates typically range from 1.15 to 1.50
- The total repayment is fixed regardless of repayment speed
- Always compare total repayment amounts between providers
- Your risk profile determines your rate
Understanding the cost of a card machine loan is essential for making a smart funding decision. Unlike traditional loans that use annual percentage rates, card machine loans use factor rates. This guide explains exactly how they work.
How factor rates work
A factor rate is a multiplier applied to the amount you borrow. Multiply the advance by the factor rate to get the total repayment.
Example: £10,000 advance with a 1.25 factor rate = £12,500 total repayment. The cost is £2,500.
Typical UK factor rates
Factor rates vary by provider and risk profile.
| Factor Rate | Cost per £10,000 | Total Repayment | Risk Profile |
|---|---|---|---|
| 1.15 | £1,500 | £11,500 | Low risk |
| 1.20 | £2,000 | £12,000 | Low-moderate |
| 1.25 | £2,500 | £12,500 | Moderate |
| 1.30 | £3,000 | £13,000 | Moderate-high |
| 1.40 | £4,000 | £14,000 | Higher risk |
| 1.50 | £10,000 | £15,000 | Highest risk |
What affects your rate
Several factors influence the factor rate you receive:
- Monthly card machine volume (higher = better rate)
- Trading history length
- Industry risk level
- Existing debts or advances
- Repayment track record on previous advances
Factor rate vs APR
Factor rates and APR measure cost differently. APR accounts for time and compounding; factor rates are flat multipliers. Because card machine loans are short-term (3 to 12 months), converting to APR produces misleadingly high numbers. Focus on the total repayment amount instead.
How to get the best rate
To secure the most competitive factor rate:
- Compare at least 2 to 3 providers
- Apply when your card revenue is strong
- Build a track record with your first advance
- Avoid stacking multiple advances
- Negotiate if you have strong revenue data
Frequently asked questions
Does repaying faster reduce the cost?
No. The total repayment amount is fixed. Repaying faster does not change the cost but does free you up for a new advance sooner.
Can I negotiate the factor rate?
Sometimes. If you have strong card revenue, providers may offer a more competitive rate.
Is a lower factor rate always better?
Generally yes, as it means a lower total cost. But also consider the repayment percentage and its impact on your daily cash flow.
How does the cost compare to a bank loan?
Card machine loans are typically more expensive on a total cost basis, but they offer speed, flexibility, and accessibility that bank loans cannot match.