In This Article
Compare business loan offers on the total amount you will repay, not on the rate alone. Put every offer on the same basis: the cash you actually receive after fees, the total you pay back, how often you pay, over how long, and what happens if you pay early. Then check what each offer asks of you: collateral, a personal guarantee, and when the lender checks your credit.
Quick answer: Ask every lender for the same four numbers in writing: cash received after fees, total repayment, payment amount and frequency, and term. Subtract cash received from total repayment to get the real cost of each offer in dollars, then compare those dollars. A factor rate and an APR cannot be compared directly.
What to compare on every offer
| Put side by side | Why it matters | Ask the lender |
|---|---|---|
| Cash you receive | Origination fees are often taken out before the money reaches you. | "How much lands in my account?" |
| Total repayment | The single number that tells you what the money costs. | "What is the total I will repay, in dollars?" |
| Cost measure | APR is an annual rate. A factor rate is a multiplier on the amount. They cannot be compared directly. | "Is this an APR or a factor rate?" |
| Payment frequency | Daily or weekly payments hit cash flow very differently from monthly ones. | "How often do I pay, and how much each time?" |
| Term | A shorter term can mean a lower total but much bigger payments. | "How many payments, over how long?" |
| Early payoff | With some products, paying early saves nothing because the cost is fixed. | "If I pay early, what do I save?" |
| Other fees | Draw fees, late fees and closing costs add to the real cost. | "List every fee, with its amount." |
| Collateral | A lien on your assets changes what happens if you cannot pay. | "Is anything secured? Is there a lien?" |
| Personal guarantee | It makes you personally liable, not just the business. | "Do I sign a personal guarantee?" |
| Credit check | A soft check does not affect your score; a hard one can. | "When do you run a hard credit check?" |
| Time to funds | Speed often costs more. It is worth knowing what it costs. | "When will the money arrive after I sign?" |
A worked example
Illustrative numbers, not offers from any lender. Two offers for $50,000:
Offer A: factor rate 1.30, repaid by daily payments over about 9 months. You repay $50,000 times 1.30 = $65,000, in about 189 business-day payments of roughly $344. Cost: $15,000.
Offer B: 18% interest, 24 monthly payments, 3% origination fee. The $1,500 fee comes out first, so you receive $48,500. You make 24 payments of $2,496.21 and repay $59,908.92. Cost: $9,908.92 in interest plus the $1,500 fee, $11,408.92.
| Offer A | Offer B | |
|---|---|---|
| Cash received | $50,000 | $48,500 |
| Total repayment | $65,000 | $59,908.92 |
| Cost in dollars | $15,000 | $11,408.92 |
| Payment | about $344 every business day | $2,496.21 a month |
| Term | about 9 months | 24 months |
| Approximate APR | roughly 73% | about 21% |
"1.30" sounds cheaper than "18%", and it is not. Offer A costs more in dollars, and because it is repaid in 9 months instead of 24, it is far more expensive per year. It may still be the right choice if you need the money fast and the purchase pays for itself quickly. The point is to make that choice knowing the real cost.
APR figures are approximations, computed from the payment schedule and including the fee. Ask the lender for the APR on any real offer. For typical costs by product, see what business financing costs.
Where to get offers to compare
You need more than one offer to compare. There are three ways to get them.
| Route | How it works | What you see |
|---|---|---|
| Apply to lenders one by one | You apply to each lender yourself. | One offer per application, each with its own credit check policy. |
| A multiple-offer marketplace (for example Lendio, Fundera or LendingTree) | One application goes to the marketplace's lender network. | Several offers, sometimes with an advisor to walk you through them. |
| A matched-first service (TopFunders.ai) | One short application; you are introduced to the partners ready to make you an offer. | What your matched partners offer, not the whole market. |
Disclosure: TopFunders.ai, operated by Funding Holdings LTD, publishes this guide. Fundera is a funding partner in our network. For how each marketplace works, in its own words, see business loan marketplaces compared, or Lendio alternatives and Fundera alternatives.
At TopFunders.ai, getting matched does not affect your credit, and we never ask for your Social Security number, Tax ID or documents to match you. We do not compare rates across partners for you, which is why this guide exists: use the table above on every offer you receive, and compare the terms before you sign.
For how often small businesses receive the amount they apply for, see small business funding statistics.
Frequently asked questions
What is the most important number when comparing business loan offers?
The total repayment in dollars, set against the cash you actually receive. That difference is what the money costs. Rates, factors and fees are all ways of arriving at it.
How do I compare a factor rate with an APR?
Not directly. A factor rate multiplies the amount you borrow; an APR is a yearly rate. Turn both into dollars: total repayment minus cash received. Then look at the term, because the same dollar cost over 9 months is far more expensive per year than over 24.
Does comparing business loan offers hurt my credit?
It depends on when each lender runs a hard credit check. Many run a soft check, or none, to show you options, and a hard check only when you move forward. Ask each lender before you apply. Checking your options on TopFunders.ai doesn't affect your credit.
Should I take the fastest offer?
Only if you know what the speed costs. Fast funding is often more expensive. Compare the total repayment of the fast offer with a slower one, and decide whether the time saved is worth the difference.
Can TopFunders.ai compare offers for me?
No. We introduce you to the funding partners ready to make you an offer, and you compare what they offer and choose. We do not compare rates across partners for you. A match is not an approval: each partner makes its own decision.
See which funding partners are ready to fund a business like yours at TopFunders.ai. Free to use, and checking your options doesn't affect your credit.
