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A bank quotes an APR. An online lender quotes a monthly rate plus a fee. A cash advance quotes a factor rate. All three can be on your desk in the same week for the same $100,000, and none of them tells you the price in the same unit. The way through is to turn every offer into the same two numbers: the true APR and the dollars it costs.
Subtract every fee taken at closing from the headline amount. A $100,000 loan with a 3% origination fee and $2,500 of closing costs puts $94,500 in your account while you still repay $100,000.
For a loan, the payment on the full amount at the stated rate. For a factor offer, amount times the factor rate, divided by the number of payments. Note how often payments come out: weekly and daily payments leave the account faster than the monthly equivalent suggests.
The true APR is the rate at which the cash you received equals the present value of every payment. It is the one number that lets a factor rate and a term loan sit in the same column. A 1.3 factor over twelve months is over 50% APR; the same 1.3 over six months is more than double that.
The lowest APR on the longest term often costs the most dollars. Look at total repaid minus cash received and at the cost for each dollar you receive, then decide which matters for what the money is for.
Compare the monthly outflow with your revenue and with the cash flow you have left for debt service. A payment that is fine on average and not in your slowest month is the one that causes trouble.
A loan usually returns unearned interest, less any penalty. A fixed-payback advance usually does not. If you expect to repay early, enter the month and see which offer changes most.
Four invented offers on $100,000: a five-year bank loan at 9.5% with 1% plus $500 of fees, a ten-year SBA-style loan at 11% with 3.5% plus $2,500 in fees, a two-year online loan at 22% with 4% fees and weekly payments, and a nine-month cash advance at a 1.32 factor with daily payments. The bank loan has the lowest true APR; the ten-year loan costs the most in dollars despite a lower APR than the online loan; the advance is several times the APR of any of them.
An APR is an annual rate charged on the balance you still owe, so it falls as you repay. A factor rate is a one-time multiplier on the amount: 1.3 on $100,000 is $30,000 of cost however fast you repay. Convert the factor offer to an APR using the real payment schedule to compare it with a loan.
Every fee taken out of the amount or added to the payments: origination, packaging, underwriting, guarantee and closing fees. Include them all; the tool treats them as reductions of the cash you receive, which is how they raise the true APR.
Not automatically. The lowest APR on a long term can cost the most dollars. Choose by what the money will earn: if it will pay back within the term at a rate above the APR, a more expensive but faster or easier-to-get offer can still be worth it.