Merchant funding costs: what you will actually pay
By Helm, Funding Specialist
- Costs use factor rates, not APR
- Factor rates range from 1.15 to 1.50
- Total repayment is fixed upfront
- Your business profile determines your rate
- Always compare total repayment amounts
The cost of merchant funding is one of the most important factors in your decision. Unlike traditional loans, merchant funding uses factor rates rather than annual percentage rates.
How factor rates work
A factor rate is a simple multiplier. Multiply your advance by the factor rate to get the total repayment. Example: £15,000 x 1.25 = £18,750 total repayment (£3,750 cost).
Typical costs
Here is what different advances cost at various factor rates.
| Advance | 1.20 Rate | 1.30 Rate | 1.40 Rate |
|---|---|---|---|
| £10,000 | £6,000 | £6,500 | £7,000 |
| £10,000 | £12,000 | £13,000 | £14,000 |
| £25,000 | £30,000 | £32,500 | £35,000 |
| £50,000 | £60,000 | £65,000 | £70,000 |
What affects your rate
Several factors influence your factor rate:
- Monthly card volume (higher = better rate)
- Trading history length
- Industry risk
- Existing advances or debts
- Previous repayment track record
How to reduce your cost
To get the best possible rate:
- Compare 2 to 3 providers
- Apply when revenue is strongest
- Build a repayment track record
- Negotiate with strong revenue data
- Avoid stacking multiple advances
Frequently asked questions
Does repaying faster save money?
No. The total repayment is fixed regardless of speed.
Are there hidden fees?
With reputable providers, no. Always ask for a full breakdown of costs before signing.
Is merchant funding more expensive than a bank loan?
On total cost, typically yes. But speed and accessibility often justify the premium.
Can I negotiate the rate?
Sometimes. Strong card revenue gives you negotiating power.