How to compare business financing offers

The business context

Create one comparison sheet for every serious offer. Where a number is estimated, label it as estimated and record the assumption. Where a term is missing, request it in writing before choosing.

Compare the same amount of usable funding

Net funding is the amount left for the intended use after relevant deductions. A $100,000 approval with $4,000 withheld in fees creates $96,000 of initial cash if there are no other deductions. If $60,000 also pays off an old facility, just $36,000 remains for new operations.

Keep these figures separate: gross financing, fees withheld, payoffs to existing providers, and new unrestricted cash. For a refinancing, the amount directed to creditors still has economic value, but it is not new working capital in your account.

For each offer, ask for a funds flow or disbursement breakdown. New York's commercial financing regulations, where applicable, distinguish recipient funds from amounts used for other obligations and certain third party payments. Even outside a particular disclosure regime, that distinction makes comparisons clearer.^[2]

A side by side example

Assume two hypothetical offers each leave $50,000 available for the same project. All deductions and scheduled payments are shown below. There are no additional fees or balloon payments, and the schedules are fixed.

Offer B lowers the monthly payment by $2,250 but increases total dollar cost by $6,000 and extends the commitment by a year. Neither conclusion alone selects the better offer. Offer A must fit the actual cash forecast; Offer B's lower payment must justify the additional cost.

The withheld fees are already captured when subtracting net cash received from total payments. Adding them again would double count them. Costs paid separately out of pocket would need to be included if they were not already reflected in the comparison.

Understand the quoted pricing method

An interest rate, annual percentage rate, factor rate, and revenue share percentage measure different things. An interest rate describes interest charged under the agreement. APR is an annualized measure that incorporates payment timing and the charges included under its calculation method. A factor rate multiplies a specified funding amount to determine a repayment or purchased amount. A revenue share sets the portion of defined receipts remitted.

Ask the provider which measure it is quoting and what it excludes. OnDeck's transparency material illustrates the use of standardized financing cost information to help borrowers compare offers. Read the specific disclosure provided with your offer; the meaning and legal requirements can vary by transaction and jurisdiction.^[1]

For a factor priced offer, see factor rates explained. Do not describe a 1.25 factor as a 25% APR, and do not assume a 10% revenue share means the financing costs 10%.

Compare payments on the same calendar

Monthly equivalents are useful for orientation, but they can hide cash pressure. A weekly payment of $1,200 averages $5,200 a month using 52 weeks divided by 12. A calendar month containing five withdrawals requires $6,000.

List actual payment dates in a forecast, especially when payroll or supplier payments fall before customer collections. If one offer collects a percentage of sales, model more than one revenue path and include any minimums, reconciliation rules, maturity, or balloon payment.

A business that can cover $5,000 after month end collections may still struggle with $1,250 withdrawn every week. Use the cash flow forecasting guide to test timing rather than relying on annual averages.

Read the terms that change the economics

Review early payoff provisions, default charges, late fees, draw fees, servicing fees, unused line fees, minimum interest, and required third party expenses. Ask whether an introductory price changes after a defined period or condition.

For an amortizing loan, check whether the rate is fixed or variable and whether the payment can reset. For a line of credit, confirm when draws mature and when the facility must be renewed. For a lease, include deposits, required insurance, end of term purchase costs, and return obligations.

Ask for a payoff illustration at the point you might realistically exit. Our guide to business loan prepayment terms explains why permission to pay early does not necessarily mean a meaningful discount.

Compare the obligations you are accepting

Record collateral, liens, guarantees, reporting duties, financial covenants, and restrictions on further borrowing. Review what constitutes default, whether there is a cure period, and whether default under another agreement can affect this one.

An offer described as unsecured may still include a personal guarantee or other contractual protections. FTC cases have addressed financing providers that misrepresented guarantees and other terms. The signed documents should match the explanation given during the sales process.^[3]

If a personal guarantee is required, read personal guarantees in business financing and have material legal obligations reviewed before signing.

Common questions about financing comparisons

Is the lowest APR always the best offer?

No. APR is useful for comparing annualized cost under a defined method, but it does not establish whether the payment dates, security, term, or use restrictions fit your business. A longer term can also increase total dollar cost even at a lower annual rate.

How do I compare offers with different funding amounts?

First identify the amount the project actually needs. Ask whether both providers can quote that amount. If they cannot, show the excess funding and its cost separately rather than treating a larger approval as automatically more valuable.

What if the provider will not explain the fees?

Do not fill in missing terms with assumptions. Request the full agreement, disbursement schedule, payment schedule, and applicable disclosures. You need those details to assess the obligation you would be accepting.

Review the shortlist with Westwind

Bring the written offers and your cash forecast to a Westwind funding advisor. We can help compare the structures, identify questions that need written answers, and discuss tradeoffs. Westwind Capital is a financing intermediary, and funding terms remain subject to the provider's decision and final agreement.