How to compare business loan offers: dollars, timing and risk

On this page

• Get five numbers in writing
• A worked example: three offers for $50,000
• What the law makes providers show you
• Terms that change the real cost
• A yardstick from SBA
• Red flags, and your right to reasons

Get five numbers in writing

Ask every provider for five numbers in writing, then line them up side by side.

1. Dollars received. The amount that reaches your bank account after fees are taken out.
2. Dollars repaid. Every payment over the term, fees included.
3. Cost. Dollars repaid minus dollars received.
4. Timing. The term, and whether payments leave your account daily, weekly or monthly.
5. APR. The yearly cost rate that accounts for the amount, the fees and the timing.

Do not compare monthly payments alone. A longer term lowers the payment and raises the total cost. A daily payment looks small and can hide a high price.

The Federal Reserve Banks' 2026 survey shows why this matters. Of firms that borrowed from online lenders, 60% said the actual cost was higher than they expected. Borrowers at small and large banks were less likely to say so. The Federal Reserve Board adds that a factor rate is not comparable to an APR or an interest rate.

A worked example: three offers for $50,000

Suppose you need $50,000 and three providers make offers. Every term below is assumed for the arithmetic. These are not quotes.

Offer A, a bank term loan.

• Term: 36 months at an assumed 10% a year, with a 2% origination fee ($1,000) taken from the loan.
• You receive $49,000. Payment: about $1,613 a month.
• You repay about $58,081. Cost: $58,081 − $49,000 = about $9,081.
• APR: about 11%.

Offer B, an online term loan.

• Term: 12 months, with 52 weekly payments of about $1,106.
• You receive $50,000 and repay $57,500. Cost: $7,500.
• APR: about 28%.

Offer C, a cash advance with a factor rate of 1.25.

• You receive $50,000 and repay $62,500 in about 126 daily payments of about $496, one for each business day over about six months. Cost: $12,500.
• APR: about 92%.

Notice three things.

• B costs fewer dollars than A, because you hold the money a third as long. Its APR is more than twice as high.
• If you need the money for three years, B does not do the job. Renewing it each year at the same price costs 3 × $7,500 = $22,500, against $9,081 for A.
• C's daily payment looks small. It costs the most in dollars and in APR.

Compare offers over the same need and the same period.

What the law makes providers show you

The federal Truth in Lending rule does not cover credit extended primarily for a business purpose (12 CFR 1026.3(a)(1)). The Federal Reserve Board notes that these disclosure standards do not apply to small business credit. Providers can quote prices in different ways. Some states require more.

• California. An estimated APR is required on commercial financing offers of $500,000 or less. It applies to a business principally directed or managed from California. APR is defined as a yearly rate reflecting the amount and timing of what you receive and pay (10 CCR §§ 921, 940, 954).
• New York. Standardized disclosures, including an estimated APR, are required on commercial financing up to $2,500,000. They apply to a business principally directed or managed from New York (23 NYCRR §§ 600.3, 600.19, 600.24).
• Texas. Covered sales-based financing providers must disclose the finance charge in dollars and the total repayment on offers under $1 million. The law does not require an APR (Finance Code ch. 398).

Other states have their own rules, and the covered products differ. In a state with no rule, ask for the same numbers in writing anyway. A provider that will not put them in writing has told you something.

Terms that change the real cost

Read these before you compare prices.

• Fees taken from the proceeds. They lower the dollars you receive and raise the APR.
• Early payoff. Ask whether paying early lowers the cost. A factor rate fixes the cost in dollars, so paying early does not lower it unless the contract says so.
• Payment frequency. Daily and weekly debits raise the APR for the same dollars.
• Collateral. Ask whether the lien covers one asset or all business assets.
• Personal guarantee. In the Federal Reserve Banks' 2026 survey, 59% of firms with debt used one.
• Default terms. Find what triggers default, and whether the contract has a confession of judgment. The FTC describes it as a document waiving your right to contest a lawsuit to collect unpaid amounts.
• Renewal. Ask what happens to the unpaid cost if you renew early.

A yardstick from SBA

SBA loans are not always cheaper, and a lender may pass SBA's upfront guaranty feeguaranty feeA fee SBA charges on the guaranteed part of a loan. The lender pays it and may pass it to you. Full definition to you (Sec. A, Ch. 4, Para. C.1.a). They do give you a published yardstick.

• Rate cap. A 7(a) or SBA Express loan from $50,001 to $250,000 may not carry a variable rate above Prime plus 6.0 percentage points. With Prime at 7.00% as of Nov 10, 2026, that cap is 13.00% (13 CFR 120.214(d)).
• Fees. A 7(a) lender may not charge commitment, origination, broker, referral and similar fees, points, prepayment fees and renewal fees (Sec. A, Ch. 4, Para. C.4). SBA's separate recoupment fee applies only to long maturities (13 CFR 120.223).
• No balloons. SBA does not allow balloon payments (App. 18, Para. A.3.g).

If a non-SBA offer carries a fee that SBA bars, ask why.

The reverse also holds. An SBA lender must certify that you cannot get the credit on reasonable terms elsewhere. If your loan meets the lender's conventional standards, it is not eligible for an SBA loan (Sec. A, Ch. 1, Para. H). A good conventional offer may be your answer.

Red flags, and your right to reasons

• A headline amount that shrinks. In a 2020 complaint the FTC alleged that a funder deducted fees from an advertised total, so businesses received far less than promised.
• A promise the contract contradicts. The same complaint alleged ads that said no personal guarantee while the contracts required one.
• An up-front fee before any loan. The FTC says any fee collected before the loan is granted is a cue to walk away.
• Pressure to sign before you see the numbers. Ask for the written disclosure first.

If a lender turns you down, you can ask why. Regulation B covers business credit. Ask in writing, and do it within 60 days of the notice (12 CFR 1002.9(a)(3)).

None of the sources cited here lists typical prices, because prices vary by lender and by borrower.