Question 1

What is a factor rate vs an interest rate?

Accepted Answer

A factor rate is a fixed multiplier applied once to the amount you receive, so the total cost is set on day one. An interest rate is charged on the balance over time, so paying down early usually lowers what you owe. Because factor-rate products are often repaid quickly, the same dollar cost can equal a much higher annual rate. To compare them fairly, convert both to total dollars repaid and to an estimated APR.

Question 2

How do I convert a factor rate to APR?

Accepted Answer

Multiply the amount funded by the factor rate to get total repayment, subtract the amount funded to get the cost, then annualize that cost based on how long you actually carry the balance. Because the balance falls with every payment, an exact APR needs the payment schedule, not just the term. Our factor rate calculator does this math for you. Use the result to compare offers side by side, not as a quote from any lender.

Question 3

What is a good rate on a business loan?

Accepted Answer

There is no single good rate, because pricing depends on the product, your credit, revenue, time in business, collateral and the economy at the time. A bank term loan to an established, profitable company will usually cost less than a fast unsecured product for a newer business. The useful question is whether the total cost is affordable from your cash flow and lower than the profit the money creates. celerfunding is not a lender and does not set rates; lenders do.

Question 4

Does an origination fee come out of the loan?

Accepted Answer

Often, yes. Many lenders deduct the origination fee from the funds before they reach your account, so you receive less than the face amount but repay the full amount. Others add it to the balance or ask you to pay it separately. Always ask for the net amount you will receive and the total you will repay. That difference is your real cost, and it is the number to compare between offers.

Question 5

Why is my origination fee so high?

Accepted Answer

Origination fees usually reflect the lender's cost and risk of setting up the deal, so they tend to be higher on smaller, faster or riskier files. A high fee can also hide in an offer that advertises a low rate. Ask the lender to explain the fee in writing, ask whether it is negotiable, and compare offers on total repayment, not on rate alone. If a fee is charged before any approval, treat that as a warning sign.

Question 6

Should I pay an origination fee on a business loan?

Accepted Answer

An origination fee is not automatically bad. What matters is the full cost of the deal: rate plus fees plus how fast you repay. A loan with a fee and a lower rate can cost less than one with no fee and a higher rate. Compare total dollars repaid and the estimated APR across offers. Never pay a fee up front to a company that has not issued a written approval.

Question 7

What is a good factor rate?

Accepted Answer

A lower factor rate is better, but the number alone does not tell you the true cost. The same factor rate is far more expensive over a short term than a long one, because you pay the full fee no matter how quickly you repay. Look at total repayment, the payment frequency and what the payment does to your daily cash. We do not publish typical factor rates because they vary widely by lender and file.

Question 8

Should I compare offers by rate or by APR?

Accepted Answer

Use APR or, even simpler, total dollars repaid over the same period. A rate on its own can mislead, because it may leave out fees, ignore how fast you repay, or be a factor rate rather than an interest rate. APR folds the fees and timing into one yearly number, which lets you line up a term loan, a line of credit and a cash advance fairly. Ask each lender for the full repayment schedule.

Question 9

How much would a $500,000 business loan cost per month?

Accepted Answer

It depends on the rate, fees, term length and payment frequency, so no honest answer is possible without an actual offer. The same amount can have a very different monthly payment over two years than over ten. Ask any lender for a written schedule showing every payment and the total repaid. You can then test that payment against your average monthly deposits to see whether it is comfortable.

Question 10

Can you pay off a business loan early?

Accepted Answer

Usually you can, but whether it saves you money depends on the contract. With interest charged on the balance, paying early often cuts the cost, unless there is a prepayment penalty. With a factor rate or fixed fee, the full cost may still be owed even if you pay early, unless the lender offers a discount. Ask before you sign: is there a prepayment penalty or an early payoff discount, and is it in writing?

Question 11

What fees come with a business loan besides interest?

Accepted Answer

Common ones include origination or underwriting fees, broker or referral fees, documentation fees, late fees, returned-payment fees and, for some products, prepayment penalties or draw fees on a line of credit. Not every lender charges all of them. Ask for a written list of every fee and when it is charged. celerfunding never charges you a fee; lenders may pay us a referral fee when a deal closes.

Question 12

How much do loan brokers charge?

Accepted Answer

It varies. Some brokers charge the borrower a fee, some are paid by the lender, and some are paid by both. Any fee you pay should be disclosed in writing before you sign, and it should not be due before you receive funds. celerfunding does not charge you anything. Lenders may pay us a referral fee when a deal closes, and that fee does not change the price they offer you.

Question 13

How do I calculate the total payback on a factor rate?

Accepted Answer

Multiply the amount you receive by the factor rate. Hypothetical example, not an offer: $10,000 received x a factor rate of 1.3 = $13,000 total repayment; $13,000 - $10,000 = $3,000 cost before any other fees. Then divide the total by the number of payments to see each payment. Use our calculator to estimate an annual rate as well.

Question 14

Is a 0% interest business loan possible?

Accepted Answer

True zero-cost business loans are rare. Some promotional cards, supplier terms or specific government or community programs may offer low or no interest for a period, usually with conditions. Offers that claim 0% often have fees elsewhere. Read the full cost before deciding.

Question 15

Why did the lender's offer come back higher than I expected?

Accepted Answer

Pricing reflects how a lender sees risk in your file: time in business, deposit consistency, credit, existing debt, industry and negative days in your bank account. A newer business, recent overdrafts or existing advances usually raise the cost. You can ask what would improve the offer, such as a longer history, a down payment or collateral. You are never obliged to accept. celerfunding is not a lender and does not set prices.

Question 16

What is the difference between total cost and monthly payment?

Accepted Answer

The monthly payment tells you whether you can carry the loan; total cost tells you what it is really worth. A longer term lowers the payment but usually raises the total you repay. A shorter term does the opposite. Look at both before you sign: make sure the payment fits your cash flow in a slow month, then choose the offer with the lowest total cost you can comfortably afford.

Question 17

Is a business loan interest tax deductible?

Accepted Answer

In many cases interest on money borrowed for business purposes can be deductible in both Canada and the US, while repaying the principal is not. The rules depend on how the funds are used, your business structure and your tax situation, and fees may be treated differently from interest. Keep loan documents and records of how the money was spent, and ask your accountant. This is general information, not financial or legal advice.

Question 18

What is APR on a business loan?

Accepted Answer

APR, or annual percentage rate, expresses the yearly cost of borrowing including interest and certain fees. It lets you compare loans with different terms and fee structures. Not all business financing is required to disclose an APR in every jurisdiction, so you may need to estimate it from the total repayment and schedule.

Question 19

How do I compare two business funding offers?

Accepted Answer

Line them up on the same terms: amount received after fees, total repaid, payment amount and frequency, term length, estimated APR, prepayment terms, collateral and guarantees. Then test each payment against your slowest month. The cheapest offer you can comfortably afford is usually the best choice.

Costs, rates and fees: 19 questions