What a factor can show
If an agreement uses a factor, multiplying that factor by the stated funding amount may show the contractual receivable or repayment amount before other fees. For example, a factor of 1.25 applied to $100,000 produces $125,000. That arithmetic does not tell you the annualized cost.
What APR is designed to show
APR expresses certain borrowing costs on an annualized basis. It is useful because time matters: paying $25,000 for the use of $100,000 over six months is economically different from paying the same dollars over two years. Commercial financing disclosures vary by product and jurisdiction, so an APR may not appear on every offer.
Build a four-number comparison
| Number | What to include |
|---|---|
| Net proceeds | The amount deposited after origination, broker, closing, or other deducted fees. |
| Total repayment | Every required dollar of principal, interest, fixed cost, and known fee. |
| Payment schedule | Amount, frequency, first payment date, final expected date, and any variable component. |
| Annualized cost | A consistent annualized calculation prepared from the actual cash flows, ideally reviewed by an accountant. |
Why timing changes the comparison
Two offers can require the same total repayment but have very different cash-flow effects. Daily withdrawals reduce principal faster and can create a higher annualized cost than a longer monthly schedule. Use a spreadsheet with the actual dates and amounts rather than dividing a fee by the funded amount.
The agreement controls
- Check whether the quoted amount is gross funding or net proceeds.
- Include every mandatory fee.
- Confirm whether early payment reduces the total cost.
- Check for variable payments, reconciliation rights, and default provisions.
- Do not rely on an oral description that conflicts with the written agreement.
Primary sources
General educational information only. This page is not a financing offer or legal, tax, or accounting advice. Actual products and terms depend on the applicant, provider, underwriting, and written agreement.