Compare the cash flows, not just the headline rate
A useful business financing comparison records how much cash reaches the business, how much it pays back, when those payments happen, and what obligations come with the agreement. A rate, factor or fee alone cannot answer all four questions. Put actual written offers into the same worksheet before making a decision.
This guide helps you organize information and questions. It does not calculate a legally defined APR, rank live providers, or recommend financing. If you are choosing which route to research, start with the business funding options guide.
Why rates, factors and total costs can mislead
The FTC's 2020 small-business financing staff perspective describes inconsistent cost presentations, including APR, fixed factors and total dollar costs. This is historical research explaining the comparison problem, not a statement of current disclosure law or today's market prices.
A factor of 1.15 on a $50,000 advance means a stated repayment amount of $57,500 before any other charges, under that simplified assumption. It does not mean a 15% annual interest rate. The time to repay, payment pattern, withheld fees and contract terms matter. Ask the provider for a written payment schedule and its complete cost disclosures rather than inventing a rate conversion.
The offer-comparison worksheet
| Field | What to record | Question if missing |
|---|---|---|
| Gross financing | Stated amount or approved limit | Is this an actual offer or an indicative maximum? |
| Net proceeds | Cash received after amounts withheld | Which deductions happen before funding? |
| Payments | Amount, frequency, start date and final payment | Are payments fixed, variable or tied to revenue? |
| Total repayment | All scheduled principal and financing payments | Which charges sit outside the stated total? |
| Separate costs | Origination, service, broker and other specified fees | Who receives each fee, and when? |
| Early payoff | Actual reduction or remaining obligation | Does paying early change the cost? |
| Downside obligations | Security, guarantees, default terms and restrictions | What remains owed if the project does not work? |
| Evidence | Offer version, provider and verification date | Which written agreement controls? |
For a line of credit, separate the available limit from the amount actually drawn. For a variable payment structure, keep scenarios rather than one apparently precise repayment date. Avoid double-counting a fee both as a deduction from proceeds and as a separate cash payment.
Worked example: two fictional offers for the same project
Illustrative arithmetic only. These are invented offers, not available products or typical market terms. Offer A states $50,000, withholds $1,000 at funding and requires twelve monthly payments of $4,400. Offer B advances $50,000 with a fixed $7,500 financing charge and six monthly payments totaling $57,500.
| Comparison | Offer A | Offer B |
|---|---|---|
| Gross amount | $50,000 | $50,000 |
| Cash received | $49,000 | $50,000 |
| Scheduled repayment | $52,800 | $57,500 |
| Simple dollar difference: repayment minus cash received | $3,800 | $7,500 |
| Payment pattern | $4,400 monthly for 12 months | About $9,583.33 monthly for 6 months, with rounding adjustment |
| Unanswered terms | Security, guarantees, other charges and early payoff | Security, guarantees, other charges and early payoff |
Under these narrow assumptions, A has a smaller dollar difference and lower monthly payments, but it provides less usable cash and runs longer. That is a description of the example, not a recommendation. The simple dollar difference is not APR, a tax treatment, or a complete economic valuation. Contract obligations and actual business circumstances remain outside the arithmetic.
Overlay the schedule on the business cash calendar
Place payments beside expected collections, payroll, supplier payments and project milestones. Mark estimates. Then ask what changes if the customer pays late, revenue falls, the project takes longer, or a variable payment increases. This exercise makes cash timing visible without pretending to establish affordability or approval.
Keep three separate results: the provider's contractual schedule, your business assumptions, and unresolved questions. Aurora can help organize the schedule from materials you supply; it should not silently fill missing rates, forecast income, or tell you a contract is safe.
Five questions to ask before accepting an offer
- How much cash will arrive, and which fees or balances are deducted?
- Can you provide the complete payment schedule and cost disclosures in writing?
- What changes the payments or final amount owed?
- What happens on early payoff, late payment, default or business closure?
- Which guarantees, security interests or restrictions require further review?
Get clarification through the provider's verified route. If a term remains unclear, keep it unresolved. A polished spreadsheet does not resolve ambiguity in an agreement.
Keep comparison evidence beside the provider relationship
Use Finta Documents to keep the written offers, repayment schedules and questions together, and CRM keeps lender contacts and follow-up connected. Use Aurora for a source-grounded comparison draft, then check every number and obtain appropriate advice before committing.
Methodology and limits
This is a Finta-authored educational worksheet based on the FTC's explanation of financing cost presentations and independently constructed arithmetic. It contains no live pricing or provider ranking. Local disclosure rules and definitions vary; the reader is responsible for checking requirements and agreement terms relevant to the actual transaction.