How is a greater number a factor of a smaller number?

It depends on the definition of "factor" that you use.

One dictionary defines "factor" to be ...

"a number or quantity that when multiplied with another produces a given number or expression"

In that sense, 7 can be a factor of 3, because 7 * (3/7) = 3.

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Often we use the term "factor" when we mean "integer divisor", or "positive integer divisor". Using this last definition, the only factors of 3 are 1 and 3.

Other times, we use the term "factor" to mean "prime factor." By this definition, the only factor of 3 is 3 itself.