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GLOSSARY

Implied APR



Implied APR is a standardized metric used to express the cost of early invoice payment as an annualized interest rate. By converting a flat discount percentage into a yearly rate based on the number of days payment is accelerated, this figure allows businesses to compare the cost of early payment programs directly against other liquidity options, such as bank lines of credit, factoring, or asset-based lending.

How it is Calculated

The implied APR is determined by the relationship between the discount rate offered and the Days Paid Early (DPE). The DPE is the number of days between the early payment date and the original contractual due date.

Implied APR formula: (Discount % / Days Paid Early) × 365.

Why Equivalency Matters

For a supplier, not all discounts are created equal. A small discount on a very short acceleration can result in a high implied APR, making it a potentially expensive way to access cash. Conversely, a larger discount that clears a payment weeks in advance may yield a lower APR than a traditional short-term loan.