If you've requested working capital for the shop, the offer probably read like this: "$40,000, 1.35 factor, about six months." No APR in sight. Here's how to read that offer in five minutes — and never mistake the format for the price again.
The formula
Advance × factor = total payback. $40,000 × 1.35 = $54,000 — a $14,000 fee, fixed the moment you sign. No amortization, no accrual, and (unless negotiated in writing) no reward for early payoff. Typical market range runs 1.20–1.50 depending on how your bank statements read: deposit consistency, NSFs, time in business.
Why 1.35 isn't "35% interest"
Two compounding reasons:
- The term is half a year, not a year. A 35% fee over six months is ~70% annualized before anything else.
- The balance declines; the fee doesn't. You pay daily. By month three you've returned half the money and still owe the full fee on all of it. Measured on money actually outstanding — the way every loan is measured — a 1.35 factor over six months is an effective annualized rate of roughly 125%.
Run your own offer through our factor rate calculator; it solves the true rate from the payment stream and shows the daily payment against your revenue.
The three numbers to extract
- Total payback — the only honest sticker.
- Daily payment ÷ average daily revenue. A shop banking $2,200/day facing a $430 daily debit is committing ~20% of gross to debt service — brutal in a slow week. Above ~10% deserves a hard pause.
- Estimated term. Same factor, shorter term = higher true rate. 1.30 over four months costs more per year than 1.40 over twelve.
Shop-specific reality: the parts float
Repair shops carry a structural cash gap — parts bought today, insurer and fleet payments arriving in 30–60 days. Fixed daily debits land on top of that float at full weight. If your revenue mix leans card-paid retail, ask for percentage-of-sales (split) repayment so slow weeks take smaller payments; if it leans fleet/insurer receivables, an advance may be the wrong product entirely — invoice factoring or a line of credit matches that cash cycle better. Our working capital comparison ranks the menu.
Negotiate these, in writing
- Prepayment discount — exists at some funders, only if pre-agreed.
- Split repayment — ask by name.
- Renewal math — before renewing, get the exact payoff and how much of the new advance pays the old one. "Double dipping" on renewals is the quietest cost in this industry.
When it's still worth it
A $14,000 fee against a dead lift in your busiest month, or an ADAS rig that books calibrations the day it's installed — premium money against time-boxed revenue can clear rationally. Premium money against ordinary slow months can't. The honest MCA guide draws that line in detail.
See your real options: start a funding request — five minutes, free, no obligation, no credit-score impact to check.
The Load Report
Seasonal rate shifts and route-band updates, flagged the month they happen — one email, no filler.
