So your confusion, is exactly why ASIC and the Small Business...

So your confusion, is exactly why ASIC and the Small Business Ombudsman have a problem with transparency, in the case of Prospa... and others... As its not very clear....And if you can't work it out, you'd imagine 95% of small business owners/retailers can't either....

I'll explain to you where you are going wrong, maths-wise.

If you take out a $26k loan from Prospa, you commence making repayments to them, of equal size from day 1.... on the full amount. So if they apply a Factor rate of 20-30%, then you have to repay $26k+ 20-30% of this, on a daily or weekly repayment plan over the duration of the loan... This means, you are paying the supposed 20% interest rate of the full principal amount, even when you owe far less ( think 6 months in, when you've paid half of it down, but are still paying full equal payments).

A crude way to get a better idea of what the real APR is by finding the average exposure over the course of the loan... say the midpoint - so take lets take the numbers you provided - 50% x ($26k+ 7.2k of interest) = $16.6k ... then apply the interest component as a % of that... so $7,200/$16,600 = circa 43% interest.

@Warnie @Christos12 thoughts?