Monday, April 13, 2026

Factor Rate vs Interest Rate

Unsecured, not collateralized business funding and financing has a different look than traditional financing you would see from a bank, like a mortgage.

With more traditional types of lending from banks, you can qualify for an SBA, term loan or maybe a line of credit. These type of fundings, you need a very good personal credit score, plus have consistent revenue that shows you can afford. These types of funding take anyway from a minimum of 4 weeks to 16 weeks.

As a consumer, you are used to seeing interest rates. What's the interest rate? Is
always a question I get asked from some that has never taken out short term financing. Mortgage rates 6.5% interest sounds great. Issue is the length of the term. When you see it all laid, how much you paid for your house, if it took you all 30 years, you are paying more than double what the sale price.

I point that out because lenders basically will lend out at almost the same rates. Short term financing can go from a factor rate from 1.1 to 1.6. This means the cost of money borry is multiplied by this number for the payback amount. You will see a weekly or daily payment. All of these are determined by your file.

So now we got the rate, let's talk length of term. I'm working a small funding where I'm doing $15k with a payback of $21 and change. I could get her more money, like $25k $30k but the term would be shorter and would raise her payments. It was like 155 days and $940, around there as weekly payment. I could of got her $30k but talking over her needs, we saw term length was important. We syndicate on many different platforms, have many partners where we have flexibility. I got her the weekly payment and term she wanted.

So the cost of the money is high for these type of loans, you have to really understand why the cost is where it is.

Unsecured Business Funding Amounts are based on your monthly revenue and the term and rates will be based on your file and risk.

The term for unsecured financing is less expensive than a collateralize mortgage loan. Difference is if they don't pay, they take the house. You don't pay, they have to hire lawyers and such.

If you have great revenue and great business credit history, no defaults, no over drawn or tons of negative days, you can get a longer term. I've seen 9 month to 18 months.