What Business Financing Costs
Most pages that promise to explain business financing costs give you a range and move on. The range is the easy part. The hard part is that the two main products are not priced in the same units, so comparing them means converting one into the other, and the conversion is where the surprises live.
This page publishes the cost bands we see across the market, says plainly which of them come from a published source and which are typical ranges nobody publishes, and explains how to compare a factor rate against an APR. No product is recommended over another, and nothing here is an offer.
Why can't anyone tell you the rate up front?
Because business financing is priced per borrower, not per product. Two businesses in the same trade, asking for the same amount in the same week, can be quoted materially different costs on the strength of deposit consistency alone. Rate cards exist in consumer credit; in business lending, they mostly do not.
What can be published honestly is the band, the range real offers fall into for each product, plus what moves you within it. That is what this page is.
APR or factor rate: the difference that costs people money
Loans and lines of credit are priced as an APR: an annualised percentage that includes interest and most fees, and that falls as you repay, because you're paying on the balance that's left.
Advances are priced as a factor rate: a multiplier fixed at the start. A $50,000 advance at a factor rate of 1.35 means you repay $67,500. That figure does not change if you repay early. The cost was set when the money landed.
This is the comparison that catches people out. A factor rate of 1.35 looks like "35%" next to an APR, and it is not the same number. Because the money is typically repaid over six to twelve months rather than a year and a half, that $17,500 of cost is charged across a much shorter window, and the annualised equivalent lands far above 35%. The shorter the repayment, the higher the equivalent APR: the same total cost, compressed into less time.
Two practical consequences:
- Ask for the total repayment amount in dollars, not the factor rate. One number, directly comparable across every offer you have.
- Early repayment usually saves nothing on an advance, and usually saves real money on a term loan. If there is any chance you'll clear the balance early, that difference belongs in the decision.
What each product costs
| Product | Typical amount | Speed after approval | Cost | Sourcing |
|---|---|---|---|---|
| SBA microloan | Up to $50,000 | Weeks | 8% to 13% | Published (SBA) |
| SBA 7(a) loan | Up to $5 million | Weeks to months | Capped by the SBA as a spread over a base rate | Published (SBA) |
| Bank term loan | Varies widely | Weeks | 6% to 20% APR | Typical range |
| Online term loan | Varies widely | 24 to 48 hours | 15% to 45% APR | Typical range |
| Business line of credit | Varies widely | 1 to 3 business days | Priced like an online term loan; you pay only on what you draw | Typical range |
| Equipment financing | Tied to the asset's value | Days, varies with the vendor | Usually below unsecured products, because the asset secures it | Typical range |
| Invoice financing | A share of the invoice, often up to 90% | 24 to 72 hours | A fee per period the invoice stays unpaid | Typical range |
| Merchant cash advance | Varies widely | Same day to 24 hours | Factor rates roughly 1.1 to 1.5, equivalent to APRs in the 40% to 350% range | Typical range |
"Published" means the figure comes from the source named and you can check it. "Typical range" means it is what the market commonly does and no authority publishes it as a commitment, not a citation dressed up, and not a promise from us or from any partner. Your actual cost is set by the funding partner that underwrites you.
Figures last verified: September 6, 2026.
Which published figures are these, exactly?
Three, and only three. Everything else on this page is a typical range.
- SBA microloans go up to $50,000, and the SBA states rates are "generally, between 8%-13%", with a maximum repayment term of seven years. The average microloan is about $13,000. Source: SBA microloan program
- The maximum 7(a) loan amount is $5 million. Source: SBA 7(a) loan program
- 7(a) interest is capped, not set, by the SBA: lenders may charge no more than a base rate plus a maximum spread, and the permitted spread narrows as the loan gets larger. The exact tiers vary by 7(a) product, so check the program page for the one you're applying under rather than assuming a single number. Source: SBA 7(a) loan program
That is the complete list of business-financing costs with an authoritative published source. It is a short list, and pages that present more than this as sourced are usually citing each other.
When each product is and isn't the right fit
SBA loans
Right when the amount is large, the purpose is planned, and weeks of processing cost you nothing. The cheapest money in this market, by a distance.
Wrong when the need is urgent, or the business is thin on trading history. The paperwork is the price of the rate.
Bank term loans
Right when you have two or more years of trading, clean statements, and time to go through an underwriting process built for exactly that profile.
Wrong when any of those three are missing. A bank decline is slow as well as negative, and the weeks it costs are weeks the alternatives were also available.
Online term loans
Right when you know the amount, want a fixed payment, and value speed enough to pay for it. The workhorse of this market.
Wrong when the need is recurring rather than one-off. You'll pay interest on the whole sum from day one, including the part you haven't spent yet.
Lines of credit
Right when the need is recurring or the timing is uncertain: seasonal stock, payroll gaps, staged projects. You pay for what you draw.
Wrong when you have a single defined cost. A term loan is usually cheaper for a known amount you'll spend immediately.
Equipment financing
Right when you're buying something with resale value. The asset secures the loan, which usually means a lower cost and more flexibility on trading history than unsecured borrowing.
Wrong when the spend becomes part of the building. Fit-out, wiring and plaster can't secure anything, and need working capital instead.
Invoice financing
Right when you've done the work, billed a business customer, and are waiting on payment terms. You're borrowing against money already earned.
Wrong when you invoice consumers, or your customer base is one or two accounts: concentration risk narrows this option quickly.
Merchant cash advances
Right when speed genuinely decides the outcome (a failure that stops trading, a deadline that can't move) and cheaper products are closed to you. Repayment flexes with daily takings, which suits a seasonal business.
Wrong when the spend is planned. This is the most expensive money on the page, and time is the one thing that makes cheaper products reachable. Stacking a second advance on an existing one is the most common way a manageable cost becomes an unmanageable one.
What moves your cost within a band?
Roughly in order of weight:
| Factor | Why it moves the number |
|---|---|
| Time in business | The single strongest signal. Every additional year of documented trading widens the field and lowers the price |
| Deposit consistency | Steady monthly deposits read as lower risk than the same annual total arriving in a few lumps |
| Whether the debt is secured | An asset behind the loan reliably costs less than nothing behind it |
| Existing obligations | Active advances reduce available capacity and raise the price of what's left |
| Personal credit | Real, but weighted less in business lending than most owners expect. It affects the band, rarely the eligibility |
| Industry | Some trades are priced up on default history alone, fairly or not |
The two at the top are worth more than the rest combined. A business six months from its second anniversary, planning a large spend, is usually better off waiting and applying with two years behind it than borrowing now at the price its current file commands.
Frequently asked questions
What is a factor rate?
A multiplier fixed when the advance is funded. At a factor rate of 1.35, a $50,000 advance costs $67,500 to repay in total. Unlike an APR, it does not fall if you repay early. The cost is set at the start.
How do I compare a factor rate to an APR?
Ask for the total repayment in dollars and the expected repayment period, then compare that total against the total cost of the loan you're considering over the same window. Comparing a factor rate against an APR directly will always flatter the advance, because the factor rate is not annualised.
Which business financing is cheapest?
SBA loans, for businesses that qualify and can wait weeks. Among fast products, anything secured against an asset generally beats anything unsecured. Merchant cash advances are the most expensive on this page.
Why are online lenders more expensive than banks?
They price for speed, for a thinner file, and for a higher default rate in the segment they serve. A business that clears a bank's criteria and can wait for a bank's process should generally use the bank.
Does a lower rate always mean a cheaper loan?
No. Repayment length changes the total: a lower rate over a longer term can cost more in dollars than a higher rate repaid quickly. Compare total repayment, not just the rate.
Are these figures a quote?
No. Nothing on this page is an offer, and no partner is bound by it. The cost you're offered is set by the funding partner that underwrites your application.