To compare business funding offers properly, work out the total dollar cost of each one under the same defined scenario, then set that beside the amount you actually receive, the term, the payment frequency and the prepayment treatment. Headline rates are not comparable across products, because some are priced as interest on a declining balance, some as a fixed total set by a factor rate, and factoring as a discount against an invoice.
Three offers can look similar on the front page and differ by tens of thousands of dollars in what actually leaves the business.
Why the headline number misleads
Interest-bearing products charge on a declining balance, so the cost falls as you repay. Fixed-cost products work differently. A factor rate is applied once, to the original amount, and does not shrink.
The distinction does not map neatly onto product names. A short-term business loan may be quoted as an interest rate plus fees, or as a factor rate producing a fixed total. Ask which convention an offer uses before comparing it to anything.
Here is the arithmetic on a fixed-cost advance. Take $100,000 at a factor rate of 1.25, repaid over 12 months in 52 equal weekly installments of about $2,404. Total repayment is $125,000, so the fee is $25,000, which reads like 25 percent. Solving for the rate implied by that schedule of cash flows gives roughly 45.7 percent as a nominal APR under that weekly schedule (the weekly rate times 52), and about 57.6 percent as an effective annual rate once weekly compounding is counted. Both sit far above 25 percent because the fee is charged on the full $100,000 while the balance you actually hold falls every week. Change the schedule and the annualized figure changes with it: the same $25,000 spread over 18 months is the same dollars at a materially lower APR. You cannot derive or verify an APR from a factor rate alone; you also need the term and the payment schedule.
For covered California commercial financing offers of $500,000 or less, providers must give standardized disclosures when they extend a specific offer, and obtain the recipient's signature on them before the transaction closes, subject to statutory exemptions. Under the Commercial Financing Disclosure Law and the DFPI's implementing regulations, providers must disclose the amount of funding the business will receive, the APR calculated for the transaction, the payment amount where applicable, the term, prepayment details, and, for products without a monthly payment, an average monthly cost. The regime covers closed-end loans, open-end credit, factoring, sales-based financing such as merchant cash advances, lease financing and asset-based lending, and the APR is calculated under the method the DFPI regulations prescribe. The prescribed disclosure text also explains that APR is not itself an interest rate, with the exact wording varying by product type. The regulations were challenged and upheld, most recently by the Ninth Circuit in April 2025. Since January 1, 2026, a California provider that quotes any charge, pricing metric or financing amount on a specific offer during the application process must state the APR alongside it, and may not use the words interest or rate in a way that could mislead. Several other states have enacted their own versions. Where you are entitled to a disclosure, read it. Where you are not, ask for the same figures.
The comparison that works across products
| What to compare | Why it matters | What to ask for |
|---|---|---|
| Amount actually received | Fees withheld at funding reduce it | Net funds disbursed, after any deduction |
| Total dollar cost | The figure that survives different pricing conventions | Cost in dollars under a stated scenario |
| Term and payment timing | Daily debits and monthly payments behave very differently | Payment size, frequency, and expected or maximum term |
| Prepayment treatment | Decides whether paying early saves anything | Whether early payoff is discounted, in writing |
| Collateral and guarantees | Changes what is at risk, not just what it costs | Any lien, blanket security or personal guarantee |
Factoring needs one extra step, because you are selling a receivable rather than repaying a loan, and the fee usually moves with how long your customer takes. Ask for the cost on a sample invoice at 30, 60 and 90 days rather than accepting a single number.
Terms that change the real cost
Payment frequency directly affects operating cash flow. A weekly debit and a monthly payment can carry identical stated costs and land completely differently on an operating account. A business with lumpy receipts can service a monthly payment comfortably and still fail a daily one.
Prepayment treatment is easy to overlook. On an interest-bearing loan, paying early typically saves interest, though some agreements carry prepayment charges or minimum interest provisions. On a fixed-cost advance, the total is usually set at the outset, so paying early saves nothing unless the agreement specifically discounts it. That single question changes whether a short term is an advantage or simply a faster drain.
Fees outside the rate can materially change the comparison. Origination, closing, wire or ACH charges per advance, monthly minimums, and lockbox administration all sit outside the quoted number and inside the real cost. On a facility you draw on rarely, a monthly minimum can make up a surprising share of what you pay in a year, so price it against your expected usage rather than your limit.
What happens on a missed payment belongs in the comparison too. Two offers at identical cost can carry very different default terms.
Compare Eight Funding Options with FundBetter
FundBetter is a national small business lender and funding marketplace, founded in 2018 and based in Miami. It may fund directly or connect a business with third-party lenders and funding partners, depending on which is the better fit, with funding from $5,000 to $5 million across eight products and most working capital offers landing between $10,000 and $500,000. FundBetter's own starting points are around six months in business, roughly $15,000 or more in monthly revenue, and a personal credit score near 500. Those are FundBetter's criteria rather than general lending requirements, and they vary by product. Checking your options uses a soft inquiry that does not affect your credit score; a hard inquiry happens later, with your permission, only on certain offers.
Our business loans hub sets out all eight products side by side, and the business loan calculator works through repayment figures on an interest-rate loan of a specific amount. For the mechanics of factor-rate pricing, see our merchant cash advance page.
The comparison in this guide only works on real offers, not advertised rates. Check your options across all eight of our products with one application, then hold what comes back to the same three tests: total cost, payment frequency and prepayment. If two offers land close, walk through them with one of our advisors before you choose.
