Know what the money costs before you sign.
Business funding is quoted as a factor rate, which is not an interest rate and cannot be compared to one. Put your offer in below and see the annualised cost, solved from the payment schedule.
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Estimated APR 54.8%. Total repayment $130,000. Cost of capital $30,000. $515.87 per business day, 252 payments.
A 1.30 factor over 12 months, solved from the actual payment schedule rather than from the factor rate.
Where the gap shows up.
The first two columns are the same deal. One is how it gets quoted, the other is what it annualises to on the payment schedule you chose. The third is what a conventional term loan would cost on the same amount over the same term.
Same $100,000 advanced over 12 months: this schedule costs $23,339 more than a conventional term loan at 12.99% APR. All figures are estimates for comparison. They are not an offer, and they exclude origination, servicing and any other fees a funder may add.
What a factor rate actually is.
A factor rate is a multiplier, not an interest rate. A 1.30 factor on $100,000 means you repay $130,000. That $30,000 is set on day one. It does not shrink as the balance comes down, and on most agreements it does not shrink if you pay the balance off early either.
That is why a factor rate and an interest rate are not the same kind of number and cannot be read side by side. Interest accrues on what you still owe, so a loan quoted at 30 percent costs far less over a year than 30 percent of the amount advanced. A factor rate charges the whole cost up front, then collects it in daily or weekly pieces while your balance is already falling. Run through the payment schedule, a 1.30 factor repaid daily over twelve months works out closer to 55 percent APR than to 30 percent.
Term length is the lever most people miss. The dollars do not move: that 1.30 factor costs $30,000 on $100,000 whether the term is six months or eighteen. The annualised rate moves a great deal. On a daily schedule the same offer is roughly 109 percent APR over six months, 55 percent over twelve, and 37 percent over eighteen. A short term is not a cheaper deal. It is a more expensive one that also takes more out of your weekly cash flow.
Every figure on this page is an estimate built from the numbers you enter. It excludes origination, servicing and any other fees, all of which push the real APR higher. Your actual terms depend on what a funder offers you.
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