Business Loan True Cost & Factor Rate Comparison Calculator

Compare the cash delivered, the cash collected, and the timing

A business-financing offer is cheaper only when it delivers the cash the business needs at a lower modeled cost over the same decision horizon—and its payment timing still fits the business cash cycle. A factor rate, nominal interest rate, fee, and daily withdrawal are different parts of that comparison.

This tool accepts two written offers and normalizes cash received, amount financed, payment cadence, mandatory fees, total outflow, cash coverage, and optional settlement quotes. It never supplies a lender, live rate, or approval estimate.

Continue with Audit two written offers line by line or Translate factor and interest pricing correctly for the next calculation.

What to copy from each written offer

Collect funds provided, amount financed, interest or factor rate, total contractual payback, payment amount, payment count, frequency, every mandatory fee, whether fees are withheld or financed, security and personal-guarantee language, prepayment policy, default provisions, and the disclosed annual comparison measure if one is supplied.

California commercial-financing disclosures illustrate why funds provided, finance charge, payment method, frequency, amount, term, and prepayment policy must be read together. Other jurisdictions use different rules.

A factor rate is not an annual interest rate

A factor rate multiplies the financed amount. Financing 50,000 at 1.20 produces 60,000 of fixed payback before separate fees. It does not mean 20% APR, because annualized cost depends on when the business receives and repays each dollar.

The Federal Reserve warns that factor rates are not directly comparable with APR or interest rates. The calculator therefore shows total dollar cost and a separately labeled modeled annualized cash-flow cost.

Hold the business cash target constant

If one funder withholds a fee, the business can receive less than the face amount. Withheld mode grosses up amount financed so the same cash target remains available. Financed fees increase principal; cash fees reduce day-zero net cash.

This avoids a common false comparison in which two offers appear to provide 50,000 but only one actually leaves 50,000 available.

Payment frequency can create a cash-flow mismatch

A 230 business-daily withdrawal is not the same burden as a 230 monthly payment. The model uses 12 monthly, 26 biweekly, 52 weekly, or 260 business-daily periods per year and reports an average monthly equivalent without hiding the original cadence.

Confirm whether holidays, weekends, skipped withdrawals, reconciliation, or sales-linked remittances change the contract timing.

How the modeled annualized cash-flow cost is built

The model starts with day-zero net cash and then records every scheduled payment plus mandatory per-payment fees at the selected cadence. It solves the periodic rate that balances those cash flows and compounds that rate for the selected number of periods per year.

This is useful for consistent internal comparison. It is not a statutory APR, a disclosure audit, or proof that a lender-disclosed value is wrong.

Stress the payment against business cash—not revenue alone

The calculator divides user-entered monthly cash available by average monthly financing outflow for a base and stress scenario. Below 1.00 means the entered cash would not cover the modeled financing outflow.

This ratio is deliberately not called DSCR or FCCR. Those measures require defined financial statements, time periods, add-backs, taxes, owner compensation, existing obligations, and lender policy.

Treat sales-linked remittances as an estimated schedule

A merchant cash advance can collect a percentage of future sales or use fixed withdrawals. When payment timing moves with sales, choose the estimated schedule label and test more than one duration. Do not turn a revenue forecast into a promised payoff date.

The fixed-payback obligation can remain unchanged even when collections slow. Reconciliation rights and contract language need separate review.

Never invent the early-settlement amount

Some fixed-payback contracts do not reduce the remaining obligation like an amortizing loan. Discounts, fees, waived charges, notice requirements, and payoff rights depend on the contract and dated quote.

The calculator reports scheduled obligation at the horizon but ranks settlement only when both actual quotes are entered. A zero stays “not supplied,” not “free payoff.”

Worked example: monthly loan versus daily factor offer

Suppose a business needs 50,000 net. Offer A is a 24-month amortizing loan at 14%; Offer B uses a 1.20 factor across 260 business-daily withdrawals. Both withhold 2%, so each finances more than 50,000 to preserve the target.

The factor offer may display a smaller withdrawal while collecting far more often. Compare total payback, average monthly outflow, annualized cash-flow cost, and stress coverage—not the printed rate or one payment in isolation.

A cheaper cash flow can carry greater recourse risk

Collateral, a personal guarantee, lien priority, confession or judgment clauses where permitted, covenants, default triggers, and collection rights are not reducible to one percentage. Mark the security warning whenever those terms apply or remain unclear.

Ask qualified legal and financial advisers to review material contracts. A numerical winner is not a recommendation.

When this is the wrong calculator

Use the Business Break-Even Calculator for operating sales volume. Use the Amortization Calculator for one generic reducing-balance loan schedule. Revolving lines, interest-only or balloon loans, equipment leases, invoice factoring, real-estate finance, and equity funding need product-specific models.

Four market modes do not create four legal calculators

The market selector changes USD, GBP, CAD, or AUD formatting and context only. U.S. state commercial-financing rules, UK business-credit regimes, Canadian provincial and federal requirements, and Australian business-lending rules differ by product and borrower.

Use current official guidance and the written contract. Do not treat an interface label as a legal classification.

Frequently asked questions

Sources and review status

• Federal Reserve — Small-business credit and merchant cash advances
• CFPB — Small-business lending rule FAQs
• CFPB — Regulation B merchant cash advance definition
• U.S. SBA — Lender Match and questions to ask
• California DFPI — Commercial financing disclosures
• New York DFS — Commercial financing disclosure regulation
• Business.gov.au — Apply for a business loan
• Business.gov.au — Reduce business-loan costs
• BDC — Business loan calculator
• BDC — Borrowing capacity and cash-flow coverage
• British Business Bank — Finance Finder
• British Business Bank — Making business finance work for you

Sources and model boundaries were checked on 2026-10-08. CalculatorGeek Editorial Team reviewed and approved the full finance and insurance package on 2026-10-08. The cited organizations supplied source material; they did not review or endorse this CalculatorGeek package. Product terms, policy forms, laws, regulatory guidance and rates can change; current written documents and applicable authorities control.