Financial terminology and the variety of small business lending options available can be difficult to understand. When you consider all of the different funding options, each with their own unique fees, cost structures, and rates, understanding and comparing them can be a challenge for small business owners in any industry.
Interest rates and factor rates are the two most common types of rate structures used in small business lending. If you’re looking for small business funding, it’s important that you understand the cost of your loan or advance before you sign a contract so you can understand the full impact your funding may have on your bottom line. This means knowing what an interest rate is and what a factor rate is, what the difference is between them, and how it impacts your terms.
To help you understand how the difference between factor rates and interest rates, we took a deep dive into these two fee structures in our latest article for Smarter Loans, an online lending resource in Canada.
Read the full article to learn more about:
- Who uses interest rates and who uses factor rates?
- What is an interest rate?
- What is a factor rate?
- How to calculate factor rate: Factor rate formula
- How to convert factor rate to APR
- Are factor rates always higher than interest rates?
- Factor rate vs. interest rate comparison chart
- Factor rate or interest rate: What’s better?