A factor rate is not an interest rate, and the difference is where stacked merchants lose the business. An advance at a 1.35 factor over an estimated 6 month payback means paying $135,000 to use $100,000 for half a year. Annualized, that is roughly a 70 percent cost of capital before origination fees, and the estimated term is the funder's estimate, not yours. If revenue rises, the daily percentage pulls the payback faster and the effective annual cost climbs higher still.
The second and third positions do not simply add cost. Each new funder prices a riskier file than the one before, so factor rates climb as positions stack. Each new daily debit also shortens the cash runway that made the business fundable in the first place, which is why the offers get worse as the need gets larger. By the third position, many businesses are remitting 15 to 30 percent of gross deposits to funders before rent, payroll, or suppliers see a dollar.
Take every position. For each: total remaining payback minus remaining balance advanced equals the cost; divide by the balance; annualize over the remaining term in months. Then add the daily remittances across all positions and divide by average monthly deposits. Those 2 numbers, true annual cost and remittance load, are what a lender sees in your bank statements in the first 5 minutes.
Cost like this is not repaired by another advance at a slightly better factor. It is repaired by retiring the positions in full at closing through a collateral backed facility and carrying 1 monthly payment sized to the cash flow. The positions end at payoff, the daily debits stop, and the same deposits that were feeding 4 funders begin rebuilding the balance sheet.
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