Business Loans · 7 min read · Updated 2026-09-01
How to compare business loan costs without getting fooled by the headline number
Factor rates, fees and repayment cadence can make an expensive loan look cheap. Here is a repeatable way to put every quote on the same scale.
Convert everything to an annualized cost
Business financing is quoted in several different languages: annual percentage rates, factor rates, flat fees, and monthly percentages. None of them are directly comparable until you translate them into the same unit.
Start with the total amount you will repay, subtract the amount you receive, and express the difference against the average balance over the life of the financing. A short repayment window concentrates that cost dramatically, which is why a 1.2 factor rate over four months is far more expensive than it looks.
Price the repayment schedule
Daily and weekly debits are not a detail. They change how much cash you can hold between receivables, which for many small businesses is the real constraint.
Before accepting a schedule, model your lowest revenue week in the past year against the debit amount. If the week does not clear comfortably, the structure is wrong even if the cost is competitive.
Find the fees that sit outside the rate
Origination, underwriting, servicing, draw and prepayment fees are disclosed in the agreement rather than the marketing page. Ask for the full fee schedule before you commit time to an application.
A lender that will not provide a written fee schedule up front is telling you something useful.
This guide is general information, not financial, legal or tax advice. MoneyHour is not a lender, bank, broker, insurer or adviser. Consider your own circumstances and speak with a qualified professional before acting.