Why the headline number can mislead
Funding offers describe cost in different ways. Some quote a factor rate, others an annual percentage rate (APR), others a flat fee. Each is accurate on its own terms, but they do not compare directly. A fair comparison needs the same inputs for every offer: how much you receive, how much you repay in total, and when each payment happens.
Factor rate vs APR
A factor rate is a multiplier applied to the amount funded. A 1.20 factor on $50,000 means repaying $60,000, for illustration. It says nothing about how long that takes. An APR expresses cost as an annualized percentage, which depends on how quickly the money is repaid. The same repayment cost has a much higher APR if the money is repaid in three months than in twelve.
This is why the factor rate alone cannot tell you which offer is cheaper. You need the time dimension.
A dated-cash-flow comparison, for illustration only
| Offer X | Offer Y | |
|---|---|---|
| Amount received | $50,000 | $50,000 |
| Total repaid | $58,000 | $60,000 |
| Repayment period | 9 months | 5 months |
| Payment frequency | Monthly | Weekly |
| Fees deducted up front | $1,500 | None |
Offer X repays less in total, but deducts $1,500 first, so you actually receive $48,500. Offer Y costs more in dollars and repays faster, which may suit a business expecting a big payment soon. Neither is better in general. The right choice depends on the timing of your revenue. These numbers are invented and are not our terms.
The comparison checklist
- Net amount deposited in your account after any fees.
- Total dollars repaid.
- Number, size and dates of every payment.
- Cost of paying early, if any.
- What happens if a payment is missed.
- Anything personal you are asked to sign.
Build a simple spreadsheet with one row per offer and one column per item. The offer that looks cheapest in one column is often not cheapest across all of them.
Common traps in side-by-side comparisons
- Comparing the headline rate of one offer with the total cost of another.
- Ignoring fees deducted before the money reaches you.
- Overlooking that a shorter term raises the annualized rate while lowering total dollars.
- Choosing on payment size alone, and finding the schedule hard to carry.
If an offer cannot be put into the same table as the others, ask for the missing figures before you decide.
Put the payments on your calendar
Lay each offer's payment dates against your own expected deposits for the same weeks. Mark the lowest balance under each. An offer that keeps your balance healthier through your slowest stretch is often worth more than one that is slightly cheaper on paper.
When you are ready to see what is available to your business, the application takes about five minutes and uses a soft credit pull. Funding runs from $25,000 to $5,000,000.