Business funding quoted as a factor rate — 1.15, 1.20, 1.35 — trips people up because the number looks tiny. It isn't a percentage and it doesn't compound; it's a multiplier on the amount advanced. The math is genuinely simple, which is exactly why it's worth doing before you sign.
The multiplication
Advance times factor equals total to deliver. Take a $20,000 advance at a 1.20 factor: you deliver $24,000 in total, so the capital cost $4,000. At 1.50 — the middle of what broker-sourced funding commonly runs — the same $20,000 costs $10,000. Same money in your account; $6,000 of difference in what leaves it.
Because the total is fixed, there is no compounding and no growing balance. What you owe on day one is what you owe on day ninety, minus what you've already delivered.
Why the delivery period matters
A fixed total delivered over a shorter period is more expensive money per unit of time — that's what the annualised figures on state-required disclosures capture, and it's why two deals with the same factor can feel very different. Ask for the estimated delivery period, and ask what happens if your sales run slower than the estimate: the honest answer is 'the period stretches and the total doesn't change.'
Also ask the inverse: if you finish early, are you penalised? No prepayment penalty means the fixed total simply ends sooner. Anything that charges you for finishing early is a red flag.
Three questions that reveal the deal's true shape
One: is the quoted factor the rate you'll actually get, or the bottom of an advertised range? A provider should quote your rate against a published range, with the representative example in the middle — not dangle the floor.
Two: are there fees outside the factor? Origination fees, monthly fees, and payment-processing surcharges can add meaningfully to a quoted factor. The number that matters is total dollars out the door.
Three: what triggers personal liability? Read the guarantee language. Recourse limited to fraud and misrepresentation is a different product from a personal guarantee of the balance.
Multiply, ask about the period, ask about early completion, and add up every fee. Ten minutes with a calculator is the cheapest protection in commercial finance. Lombard publishes its factor range and a worked example on every offer — the disclosure does the math with you, not to you.