Definition
A factor rate is a multiplier used to determine the cost of a financing option, typically in alternative lending. It is applied to the loan amount to calculate the total repayment amount. Total Repayment=Loan Amount�Factor Rate
Related Services
Alternative lending, finance consulting, and small business loans rely on factor rates to structure financing terms.
Problem and Application
Factor rates can be more transparent than interest rates, but they may result in higher overall costs for borrowers, especially for short-term loans.
Conclusion
Factor rates are useful for straightforward financing terms, but borrowers should carefully evaluate the total cost of financing to avoid excessive repayment amounts.
