How to use this calculator
Term loans (bank loans, SBA loans, equipment loans, online term loans):
- Enter the loan amount, interest rate and term in months.
- Pick how often you pay: monthly, weekly, or daily, meaning every business day (about 21 debits a month, which is how many online lenders collect).
- Enter any origination or upfront fee as a percentage. Fees are assumed to come out of the money you receive.
You get the payment, total interest, total cost and the APR, which includes the fee.
Factor-rate financing (merchant cash advances and some short-term loans):
- Enter the advance amount and the factor rate.
- Choose how it’s repaid: a fixed daily debit over a term, or a holdback, a percentage of your card or bank deposits. For a holdback, enter your typical monthly sales.
- Add any upfront fees.
You get the daily payment, the total you’ll repay and the equivalent APR, plus a table showing how the APR changes if the same factor rate is repaid faster or slower.
The formulas
A term loan’s level payment, where P is the amount borrowed, r is the annual rate divided by the payments per year and n is the number of payments:
A factor-rate advance is simpler on its face: total payback = advance × factor rate, split into equal daily debits.
The APR puts both on the same scale. It is the rate i per payment period that makes the payments worth exactly the cash you actually received, multiplied by the number of periods in a year:
This is the actuarial method used for Truth in Lending APRs (Regulation Z, Appendix J), and the one New York and California tell commercial lenders to follow for their estimated-APR disclosures. Daily payments use 252 business days a year.
Worked example: term loan
You borrow $100,000 at 10% for 36 months and pay a 2% origination fee.
| Payment frequency | Payments | Each payment | Total interest | APR with 2% fee |
|---|---|---|---|---|
| Monthly | 36 | $3,226.72 | $16,162 | 11.39% |
| Weekly | 156 | $742.59 | $15,844 | 11.42% |
| Daily (business days) | 756 | $153.13 | $15,769 | 11.42% |
More frequent payments reduce the balance sooner, so total interest falls a little. The APR barely moves, because the rate is the same. The fee is what lifts the APR above 10%: you only receive $98,000.
Worked example: merchant cash advance
You’re offered a $50,000 advance at a 1.35 factor rate, repaid by daily debits over 9 months (189 business days).
- Total payback: $50,000 × 1.35 = $67,500
- Daily debit: $67,500 ÷ 189 = $357.14
- Equivalent APR: 84.12% with no fees, or 90.14% with a 2% ($1,000) upfront fee
If the same advance is repaid by a 12% holdback on $60,000 of monthly sales, the daily remittance is about $342.86 and repayment takes about 197 business days, an APR of 86.55% with the 2% fee. If sales slow to $45,000 a month, repayment stretches to about 12.5 months and the APR drops to 64.98%. The total you repay stays $67,500 either way.
Why factor rates mislead
A factor rate of 1.35 looks like “35% interest.” It isn’t, for two reasons:
- You pay the charge on the full amount, even as you repay it. With daily debits, the balance you still owe drops every business day, so on average you have only about half of the money for the full term. Interest on a regular loan shrinks as you pay down the balance; a factor charge doesn’t.
- The term isn’t in the rate. The same 1.35 costs far more if it’s repaid in 3 months than in 18.
Equivalent APR of common factor rates, repaid in equal business-day debits with no fees:
| Factor rate | 3 months | 6 months | 12 months | 18 months |
|---|---|---|---|---|
| 1.10 | 76.36% | 38.46% | 19.32% | 12.88% |
| 1.15 | 112.89% | 56.88% | 28.51% | 19.03% |
| 1.20 | 148.52% | 74.74% | 37.5% | 25% |
| 1.25 | 183.2% | 92.21% | 46.26% | 30.91% |
| 1.30 | 217.05% | 109.28% | 54.82% | 36.59% |
| 1.40 | 282.65% | 142.19% | 71.38% | 47.55% |
| 1.50 | 345.68% | 173.77% | 87.13% | 58.19% |
Regulators have noticed. New York’s Commercial Finance Disclosure Law (Financial Services Law Article 8 and 23 NYCRR Part 600, in force since August 1, 2023) requires providers to disclose an estimated APR and the total repayment amount on most commercial financing of $2.5 million or less, including sales-based financing. California’s commercial financing disclosure rules, in effect since December 9, 2022, require an estimated APR on offers of $500,000 or less, merchant cash advances included. The FTC has also taken action against merchant cash advance companies; in 2023 a federal court permanently banned the owner of RCG Advances from the industry after the FTC showed the company misrepresented its financing terms and used abusive collection tactics.
Tips before you sign
- Compare APRs, not factor rates or monthly payments. It’s the only number that accounts for fees, timing and term together. You can double-check any offer with the APR calculator.
- Check SBA options first. SBA 7(a) loans go up to $5 million, and the SBA caps the interest rate lenders may charge (for variable-rate loans, the base rate plus 3% to 6.5% depending on loan size). Approval is slower, but the cost is usually far lower than short-term online financing.
- Ask about prepayment. Many factor-rate deals charge the full factor amount even if you repay early, so there’s no saving from paying faster. Term loans usually let interest stop when you pay off.
- Stress-test the daily debit. A fixed daily payment comes out whether or not it was a good sales day. Check it against your slowest month and your margins.
Assumptions and limitations
Term-loan payments are level, interest accrues at the annual rate divided by the payments per year, and the last payment absorbs rounding. Daily schedules assume 21 business days a month. Fees are treated as deducted from proceeds at closing. The factor-rate APR assumes steady payments starting one business day after funding; actual holdback payments vary with your sales, and contracts can include extra fees not entered here. SBA loans carry guaranty fees and variable rates that change with the prime rate.
Sources
- U.S. Small Business Administration: 7(a) loans
- SBA: 7(a) terms, conditions and eligibility (maximum interest rates and maturities)
- New York Financial Services Law §803: commercial financing disclosures (estimated APR) and §802 (exemption for transactions over $2.5 million)
- California DFPI: Final Statement of Reasons, commercial financing disclosure regulations
- CFPB: Regulation Z, Appendix J, annual percentage rate computations
- FTC: Court permanently bans merchant cash advance owner (RCG Advances), October 30, 2023
This calculator gives estimates for comparing offers. Your contract’s terms, fees and disclosures govern what you’ll actually pay.
Frequently asked questions
How is a business loan payment calculated?
A term loan uses the standard amortization formula, with the annual rate divided by the number of payments per year. A $100,000 loan at 10% for 36 months costs $3,226.72 a month. Paid weekly it's 156 payments of $742.59, and paid every business day it's 756 payments of $153.13.
What is a factor rate?
A factor rate is a multiplier that sets how much you repay on a merchant cash advance or some short-term loans. A $50,000 advance at a 1.35 factor rate means you repay $67,500, no matter how quickly you pay it back. It's usually written as a decimal between about 1.1 and 1.5.
How do I convert a factor rate to APR?
Find the interest rate at which the daily or weekly payments are worth exactly the cash you received, then annualize it. That's what this calculator does. A 1.35 factor rate repaid in daily debits over 9 months works out to about 84% APR before fees, far more than the 35% the factor rate suggests.
Why is a factor rate misleading?
The fee is charged on the whole advance up front, but you start repaying the next business day, so on average you only have about half the money for the full term. A shorter term makes it worse, because the same fixed charge is squeezed into fewer days. A 1.2 factor rate repaid over 6 months is about 75% APR.
Do lenders have to tell me the APR on a business loan?
The federal Truth in Lending Act covers consumer credit, not business loans. But New York requires an estimated APR on most commercial financing offers of $2.5 million or less, and California requires one on offers of $500,000 or less, including merchant cash advances. Elsewhere, you may need to work it out yourself.
Why is my APR higher than my interest rate?
Upfront fees. If a 2% origination fee comes out of a $100,000 loan, you receive $98,000 but repay the full $100,000 plus interest. At 10% for 36 months, that raises the APR to about 11.39%.
Updated November 2026. Results are estimates for educational purposes and depend on the inputs you provide.