What is the Average Factor Rate for a First Position MCA?

I just got off the phone about twenty minutes ago with a guy running a plumbing HVAC business out in Arizona. He was frustrated. Totally understandable. He’d been shopping around for capital to buy a couple of new vans, and every broker he talked to threw a different set of numbers at him.

He asked me the same question I get asked almost every single day: "What is the normal rate for this stuff? Am I getting ripped off?"

Here’s the thing. In the world of Merchant Cash Advances (MCAs), there is no standard interest rate like you’d see with a mortgage or a bank loan. We don't even use interest rates. We use "factor rates." And if you don’t know what you're looking at, it can feel like you're reading a foreign language.

Since I spend my entire day looking at bank statements and funding offers, I’m gonna break down exactly what the average factor rate is for a first position MCA, what moves that number up or down, and how to make sure you aren't paying more than you should.

First, let's answer the question

If you have a first position MCA—meaning you have zero other cash advances open and you're letting a funder take the priority spot on your receivables—the average factor rate typically lands somewhere between 1.15 and 1.35.

Can it be lower? Yeah. I’ve seen "A-paper" files (really strong businesses) get approved at a 1.10 or even a 1.09. That’s basically the gold standard.

Can it be higher? Absolutely. If your cash flow is spotty or your industry is considered "high risk" (like trucking or crypto), even a first position deal might creep up to 1.40 or 1.45.

But for the average merchant doing decent volume with okay credit? Expect to see something like 1.25.

Wait, how does the math actually work?

I know, just giving you a decimal point number isn't helpful if you don't know how to apply it. Unlike an APR, which compounds over time, a factor rate is fixed. It’s a simple multiplier.

Let's say you need $50,000 for inventory.

• Funding Amount: $50,000
• Factor Rate: 1.25
• Total Payback: $62,500 ($50,000 x 1.25)

That means the cost of the capital is $12,500. You don't save money by paying it off early (usually), and the cost doesn't go up if it takes a little longer to pay back. It is what it is. The funder buys $62,500 of your future sales for $50,000 cash upfront.

Why "First Position" makes such a huge difference

Position matters. A lot.

Think of it like a lien on a house. The first mortgage gets paid first if things go south. In our world, the "1st position" funder is the one taking the first bite out of your daily or weekly deposits. Because they have priority, they are taking the least amount of risk.

Lower risk for us means a lower cost for you.

I had a client last month, a retail shop owner, who already had two MCAs open. He wanted a third one. Because that third lender would be in "3rd position" (meaning they are last in line to get paid), his offer came in at a 1.49 factor rate. That’s expensive money.

If he had paid off the other two first, he probably could have qualified for a 1.20. That's why we always try to consolidate or pay off existing balances if we can. Being in first position saves you thousands of dollars.

What determines if you get a 1.15 or a 1.35?

So, you know the range. But where do you fall in it? When I'm reviewing a file at LoanQuail, or when I'm arguing with an underwriter to get a client a better deal, here are the variables we are looking at.

1. Deposits and Consistency

This is number one. We want to see boring bank statements. Seriously. Boring is good. If you deposit roughly the same amount of money 15 to 20 times a month, underwriters love that. It shows stability. If you deposit $100k one month and $20k the next, you look risky, and your rate goes up.

2. Negative Days

This is the killer. A "negative day" is a day where your bank balance ends lower than it started, or dips below zero. If you have 5 or 6 negative days in a month, getting approved for a 1st position deal is gonna be tough, and if you do, the rate will be high because the lender is worried about bouncing payments.

3. Industry type

I’m gonna be real with you—some industries just pay more. Construction, trucking, and auto sales are considered higher risk. Why? Because income is lumpy. You might land a huge contract on Tuesday and then nothing for three weeks. Medical practices, restaurants, and grocery stores usually get lower rates because the cash flow is daily and predictable.

4. Time in Business

If you've been open six months, you're high risk. If you've been open ten years, you've proven you can survive tough times. Older businesses generally get that 1.15 to 1.20 range.

5. Credit Score (Yes, it still matters)

A lot of people say MCAs don't care about credit. That’s... well, it's kinda a lie. While we don't require perfect credit (we fund folks with 500 scores all the time), the rate is definitely tied to your FICO. If you have a 700+ FICO, I can fight to get you a 1.15 rate. If you have a 520, you're probably looking at 1.30 or higher, even in first position.

Is a 1.25 Factor Rate "Good"?

Honestly? It depends on what you're doing with the money.

If you're borrowing money at a 1.25 factor rate to pay off a credit card that has 5% interest, that’s a terrible idea. Don't do that.

But let's say you own a manufacturing plant. You get a rush order that will generate $40,000 in profit, but you need $20,000 right now to buy the raw materials. You don't have the cash, and the bank takes two months to approve a loan. If you take an MCA with a cost of $5,000 (factor rate 1.25), you still clear $35,000 in profit.

In that case, the rate is just a cost of doing business. It bought you the opportunity.

Beware of the "Fees"

One thing to watch out for—and we see this with some of the sketchier lenders out there—is the hidden fees. You might get a factor rate of 1.25, but then they tack on a 10% "origination fee," a "risk assessment fee," and a "wire fee."

Suddenly that 1.25 is effectively a 1.38.

At LoanQuail, we try to keep this stuff transparent. If there's an origination fee (which is common in the industry), we tell you upfront so you can calculate the actual money you're receiving vs. what you're paying back.

Is an MCA even the right move for you?

Look, I sell these products for a living, but I turn people away if it doesn't make sense for them. An MCA is fast, unstructured capital. It’s great for speed and accessibility.

But if you have collateral, like real estate, or really strong financials, you might qualify for something cheaper. We do Business Lines of Credit and Real Estate Backed loans that act more like traditional bank financing with way lower costs.

If you have a 1st position opportunity right now, you're sitting in the driver's seat. You have the leverage because every funder wants to be the first one in the door. Don't just take the first offer you see.

We handle this stuff all day long. If you're wondering what rate you actually qualify for—or if you want someone to look at an offer you already got to see if it's junk—give us a shout. We can run a quick check without dinging your credit score just to see where you stand.

Check your eligibility with us. It takes like two minutes, and honestly, it’s better to know your real options before you sign a contract that locks up your receivables for the next nine months.