Is a factor rate the same as an interest rate?

No. A factor rate is a fixed multiplier on the funded amount and is not annualized, so it cannot be compared directly with an APR without converting both to total dollars.

Does comparing offers hurt my credit?

It depends on whether each provider performs a soft or hard inquiry, and when. Ask each one directly before authorizing a review.

How to Compare Business Loan Offers

Updated August 2026 · 6 min read · Reviewed by BusinessLending360 editorial team

Two offers for the same amount can differ by thousands of dollars in real cost. These are the fields worth reading carefully before you sign anything.

1. Total cost of capital, in dollars

Ask every provider for the total amount you will repay, in dollars, including all fees. This is the only figure that compares cleanly across different structures and pricing conventions.

2. APR versus factor rate

APR expresses annualized cost including certain fees. A factor rate is a multiplier applied to the funded amount and is not annualized — a 1.3 factor on $50,000 means $65,000 repaid, regardless of how quickly you repay it. They are not directly comparable without converting both to total dollars over the actual repayment period.

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3. Fees

Fees are where offers quietly diverge. Look for:

Origination or underwriting fee
Draw fees on a line of credit
Servicing or monthly administrative fees
Late fees and returned-payment fees
UCC filing or documentation fees

4. Repayment rhythm

Daily and weekly debits affect cash flow very differently from monthly payments, even at the same total cost. Model the payment against your slowest expected week, not your average one.

5. Prepayment terms

Check whether early repayment reduces the cost. With interest-bearing loans it usually does; with fixed factor-rate products, the full amount may still be owed unless the agreement includes an explicit discount.

6. Guarantees, liens and covenants

Confirm whether a personal guarantee is required, whether a UCC lien will be filed, and whether the agreement restricts taking additional financing. These terms matter as much as price.

Frequently Asked Questions

Is a factor rate the same as an interest rate?: No. A factor rate is a fixed multiplier on the funded amount and is not annualized, so it cannot be compared directly with an APR without converting both to total dollars.
Does comparing offers hurt my credit?: It depends on whether each provider performs a soft or hard inquiry, and when. Ask each one directly before authorizing a review.

Sources

Federal Trade Commission — Small Business Financing— Guidance on avoiding deceptive financing offers and business scams.
Consumer Financial Protection Bureau — Small Business Lending— Federal small business lending data collection rule (Section 1071).
Federal Reserve — Business Lending Rates (H.15)— Benchmark interest rates that influence business financing pricing.

This guide is general information, not financial, legal or tax advice. BusinessLending360 is not a bank or a direct lender and does not guarantee funding, approval, terms or timing.

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