The cost of financing is more than a single number. Knowing how different products express cost lets you compare offers on equal footing and choose what genuinely fits your business.
Interest rates vs. factor rates
Loans typically quote an interest rate, often expressed as an APR that captures the annualized cost. Merchant cash advances and some revenue-based products use a factor rate instead — a multiplier (for example, 1.2) applied to the funded amount that tells you the total repayment, not an annualized rate. The two are not directly comparable without doing the math.
Fees to look for
- Origination or administrative fees
- Prepayment terms — whether paying early saves you anything
- Late or missed-payment fees
- Any servicing or maintenance charges
Payment frequency matters
Daily or weekly payments affect your cash flow differently than monthly ones, even at the same headline cost. Map the payment schedule against your revenue cycle so repayment stays comfortable during slower periods.
Questions to ask any funder
- What is the total amount I will repay?
- How often are payments due, and how are they collected?
- Are there fees beyond the rate, and is there any benefit to early payoff?
Any figures you see in calculators or examples on this site are illustrations only and not an offer of credit. Actual terms vary by applicant and are subject to underwriting review.
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This article is for general educational purposes only and is not financial, legal, or tax advice. All financing is for business purposes only and subject to underwriting review.