Revenue-based funding quotes arrive priced in factor rates — "1.35 on $60,000" — a format that makes triple-digit money sound like a service fee. Five minutes here and the format never fools you again.
The formula and the worked number
Advance × factor = total payback. $60,000 × 1.35 = $81,000, a $21,000 fixed fee. No amortization, no interest accrual — and no discount for finishing early unless one is written into the agreement.
Read as a percentage, 1.35 looks like "35%." But you repay over roughly six months, and the balance declines daily while the fee stays fixed. Measured like any other loan — on money actually outstanding — a six-month 1.35 advance runs an effective annualized rate of roughly 125%. Our factor rate calculator does this math on your exact offer, including the repayment-structure comparison below.
The hospitality-specific trap: fixed debits vs. occupancy
Hotels are the seasonal business par excellence, and repayment structure matters more here than in almost any other industry. A fixed daily ACH debit calibrated against your peak-season statements will land at full weight in the shoulder months. A percentage-of-sales (split/lockbox) structure takes its share of what you actually banked — heavy in August, light in January. Same factor, same total fee, completely different survival profile. If your funder offers both, the split is usually worth taking even at a slightly higher factor; our off-season cash flow guide covers the seasonal logic in depth.
Three numbers to extract from any offer
- Total payback — the honest price tag.
- Daily payment ÷ average daily revenue — above ~10% and soft weeks will hurt; above 15% and they'll compound.
- Estimated term — the same factor over a shorter term is a higher effective rate. 1.30/4-months costs more per year than 1.40/12-months.
Terms worth negotiating (in writing)
- Prepayment discount — some funders reduce payback for early clearance, but only if pre-agreed.
- Split/lockbox repayment — ask by name; it's frequently available and rarely offered first.
- Renewal math — before any renewal, get the exact payoff figure and what portion of the new advance services the old one. Paying a new factor on money that repays an old fee ("double dipping") is the industry's quietest cost.
When the price is still worth paying
A $21,000 fee against a genuinely time-boxed need — the PIP phase that must pass inspection (PIP financing guide), the boiler replaced before the season opens — can clear rationally when cheaper products can't move in time. The discipline is running the number first and sizing the advance to the need, not the approval. See the full menu in our hotel working capital comparison, then 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.
