Business loan calculator: what will each offer really cost?
Two funding offers can look similar on the first page and cost very different amounts by the last payment. Enter the numbers from each offer below to see the cash you receive, what you pay back, and an estimated annual rate that puts both on the same scale.
By Clario Capital Team · Published
Most business owners compare offers by the headline: the amount, and either an interest rate or a factor rate. Those two numbers are not measured the same way, so comparing them directly is like comparing kilometres with miles. This calculator does the conversion for you. It is built for two common offer shapes: a loan paid back monthly, and an advance with a factor rate paid back weekly or every business day.
| Illustrative result | Offer A | Offer B |
|---|---|---|
| Cash you actually receive | $49,000 | $50,000 |
| Each payment | $1,661 | $2,154 |
| Number of payments | 36 | 26 |
| Roughly how long | 36.0 months | 6.0 months |
| Total you pay back | $59,786 | $56,000 |
| Cost of the money (interest or factor cost plus fees) | $10,786 | $6,000 |
| Estimated annual rate, fees included | 13.4% | 44.6% |
Offer B costs fewer dollars in total, but Offer A has the lower estimated annual rate. That usually means the cheaper-looking offer is repaid much faster. Ask yourself whether your cash flow can carry those payments.
Estimates only, using equal payments and no missed or early payments. Real offers can differ, and the actual lender written terms govern.
How to fill it in
Copy each number straight from the written offer, not from a phone call or a summary email.
- Amount: the full amount on the agreement, before anything is taken off.
- Annual interest rate (Offer A): the yearly rate on a loan that charges interest on what you still owe. If the rate is variable, use today’s rate and remember it can move.
- Factor rate (Offer B): a multiplier such as 1.12 or 1.3. Multiply it by the amount to get the total you repay. It is not a percentage and it is not a yearly figure.
- Term and payment rhythm: how long repayment runs and whether payments come out monthly, weekly or every business day.
- Upfront fees: origination, administration, documentation or broker fees that are deducted from the funding or paid at signing. The calculator subtracts them from the cash you receive, which is why they push the estimated annual rate up.
Reading the result: the example already loaded
The calculator opens with an illustrative pair of offers so you can see how the numbers behave. These are made-up examples, not quotes.
| Illustrative example | Offer A: loan | Offer B: factor-rate advance |
|---|---|---|
| On paper | $50,000 at 12% a year for 36 months, $1,000 fee | $50,000 at a 1.12 factor, 26 weekly payments, no fee |
| Cash received | $49,000 | $50,000 |
| Payment | about $1,661 a month | about $2,154 a week |
| Total paid back | about $59,786 | $56,000 |
| Cost of the money | about $10,786 | $6,000 |
| Estimated annual rate | about 13.4% | about 44.6% |
Offer B costs fewer dollars in total. It also has an estimated annual rate more than three times higher. Both statements are true at once, because Offer B is repaid in about six months instead of three years. You get the money for a much shorter time, and the payments are much larger while they last.
Neither number is the “right” one on its own. The total dollar cost tells you what the funding costs if everything goes to plan. The annual rate tells you how expensive the money is for the time you have it, and it is the fairest way to line up offers with different lengths. Look at both, then look at the payment line and ask whether your slowest month can cover it.
Three things the calculator cannot see
1. Prepayment terms
On many interest-bearing loans, paying early saves interest. On many factor-rate agreements, the total payback is fixed, so paying early saves nothing unless the agreement offers a discount. Ask each lender, in writing, what happens if you repay early.
2. Security and guarantees
Two offers with the same cost can ask for very different things if the business struggles: a personal guarantee, a claim on equipment, or a general security agreement over business assets. Read that section of the agreement as carefully as the price.
3. How flexible the payment is
A fixed monthly payment is easy to plan around. A daily or weekly debit can be easier to meet when sales come in every day, and harder in a slow week. Some revenue-based products adjust with your sales instead of staying fixed. The calculator assumes equal payments, so treat its result as a starting point for products that flex.
When a term loan tends to win, and when it does not
The Competition Bureau describes term loans as financing for tangible and intangible assets, often with an amortization matched to the asset’s useful life and lower interest than other forms of commercial lending. That makes a longer, cheaper-per-year loan the natural fit for equipment, renovations or anything that pays off slowly.
A shorter, higher-rate product can still make sense for a short, clear-cut need where the return comes back quickly, such as stock you know you will sell within weeks. The calculator helps you check that the return is bigger than the cost. If it is not, the cheaper-looking offer is not cheap.
If you are not sure which shape fits your need, our guide to business loan interest rates in Canada walks through how each kind of offer is priced, and business lenders in Canada, compared covers who offers which products.
Getting real numbers to put in
A calculator is only as good as the offers you feed it. Clario Capital is not a lender. One application is shared with our network of lending partners so you can compare competing offers, and each lender sets its own rate based on your credit, business performance and terms. Our service is free: there are no fees to apply or to receive offers from Clario, though individual lenders may have their own fees, which are disclosed. Comparing carries no obligation. You commit only if you choose an offer. When you are ready, start one application and bring the written offers back here.
Sources
This guide is general information for Canadian business owners, not financial, legal or tax advice. Clario Capital is not a lender. Funding approval, rates and terms are not guaranteed and are set solely by our lending partners. Any examples are illustrative. The actual lender written terms govern any offer you receive.