Oregon Now Offers Its Own Revenue-Based Loans. Here's What a 2.0 Factor Rate Actually Costs.

Published by Gradino · Free tools for merchants · gradino.com

Here's the short answer first:

What Oregon is offering: A state-run "Royalty Loan" — up to $1 million to a small business in exchange for a cut of future sales. Instead of a quick MCA-style payback, this one stretches out 3-5 years, but you pay back 2X what you borrowed total ($1 borrowed = $2 owed). Once you've paid back double, payments stop.

It sounds like a friendlier, slower version of an MCA — but because it takes so long to pay off, the actual annualized cost is moderate, not as brutal as a typical fast MCA. I calculate the real APR in the article below.

Oregon has entered the alternative lending business directly. The state is now offering small businesses up to $1 million through a program structured almost exactly like a merchant cash advance, complete with a factor rate.

Here's what the program actually offers, and what it costs in real terms.

What Is the Oregon Royalty Loan Program?

The State of Oregon is operating a revenue-based financing program through its Department of Business Oregon, branded as a "2X Royalty." A business can receive up to $1 million in funding in exchange for a percentage of future sales, repaid monthly until the business has paid back twice the amount it borrowed.

According to the state's own materials, royalty payments continue at a set percentage of monthly sales or revenue until the business has paid back 2X the funded amount. Once that threshold is reached, payments stop. The state estimates this typically takes three to five years. The product is collateralized and requires a personal guarantee.

In Oregon's own regulatory language, the program defines this royalty as payments calculated as a percentage of the borrower's sales, intended to yield an "adequate rate of return typically up to 2X on the monies loaned, as determined at the sole discretion of the Department."

Oregon isn't alone in doing this. New York City has its own Mayor-backed Revenue-Based Loan Program, and Washington State launched a similar Revenue-Based Financing Fund in 2025.

What a 2.0 Factor Rate Means

A factor rate works the same way regardless of who's offering it, whether it's a private MCA funder or a state government program.

A factor rate of 2.0 means for every dollar you borrow, you pay back two dollars. Borrow $100,000, repay $200,000. The $100,000 difference is the cost of the capital.

For comparison, typical private-market MCA factor rates run between 1.1 and 1.5. A 2.0 factor rate is meaningfully higher than what most established small businesses see from private MCA funders.

On the surface, that sounds expensive. But factor rate alone never tells the full story. The other variable that determines real cost is how long you take to pay it back.

Calculating the Real APR

This is the calculation that matters and the one the state's promotional materials don't walk through.

The formula:

APR = ((Total Payback − Amount Borrowed) ÷ Amount Borrowed) ÷ Term in Days × 365 × 100

Using Oregon's own example: a 2.0 factor rate repaid over the high end of their stated range, 5 years.

• Amount borrowed: $100,000
• Factor rate: 2.0
• Total payback: $200,000
• Cost: $100,000
• Term: 5 years (1,825 days)

$100,000 ÷ $100,000 = 1.0
1.0 ÷ 1,825 days × 365 × 100 = 20% APR

At the low end of Oregon's stated range, 3 years:

• Term: 3 years (1,095 days)

1.0 ÷ 1,095 days × 365 × 100 = 33.3% APR

So depending on how fast a business's revenue allows it to pay down the 2X obligation, the Oregon Royalty Loan works out to roughly 20% to 33% APR. These figures use simple annualized cost. Our calculator's Real APR method, which accounts for the payment schedule, reads higher on multi-year deals.

How That Compares

This is the part worth sitting with. A 2.0 factor rate sounds aggressive next to a typical 1.3 MCA factor rate. But because the Oregon program stretches repayment over years instead of months, the actual annualized cost lands well below most private MCA deals.

A private MCA with a 1.3 factor rate repaid in 6 months works out to roughly 60% APR. The same 1.3 factor rate repaid in 3 months is closer to 120% APR.

So a business choosing between a 1.3 factor rate MCA paid back in 4 months (around 90% APR) and Oregon's 2.0 factor rate paid back over 4 years (around 25% APR) is actually getting a substantially cheaper deal from the state program, despite the larger-looking factor rate.

This is exactly the trap that factor rates create for borrowers. The number on its own tells you almost nothing. Term length is what determines whether a deal is reasonable or predatory.

What to Watch For

The Oregon program isn't without real cost and real risk. A few things worth understanding before applying:

It's collateralized and personally guaranteed. Unlike many MCA products that rely primarily on revenue underwriting, this program requires both collateral and a personal guarantee. That means personal assets are on the line if the business can't meet its obligations.

The repayment period isn't fixed. It typically takes three to five years, but that's an estimate, not a guarantee. If your sales come in lower than projected, you may be paying the royalty percentage for longer than five years before hitting the 2X threshold, which extends your real-world cost timeline.

Discretion sits with the Department. Oregon's own regulatory language gives the Department of Business Oregon sole discretion in determining what qualifies as an adequate rate of return. The terms of any specific deal may vary from the general 2X structure described in public materials.

Eligibility is based on projections. The state evaluates both historical and projected future sales. Projections are inherently uncertain, and a business that doesn't hit projected revenue could see its actual repayment timeline and cost extend further.

The Bottom Line

A 2.0 factor rate looks aggressive on paper, but in a program structured to repay over three to five years, it translates to an annualized cost that's often lower than a typical private MCA repaid over a few months. That's the opposite of what most people would assume looking at the factor rate alone.

This is exactly why factor rate by itself is never enough information to evaluate a financing offer. Whether it's a private MCA or a state-run program, you need the term length to calculate what you're actually paying.

If you're evaluating any financing offer, public or private, run the real APR calculation before deciding.

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