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Why the fee changes the APR
If a lender deducts a 3% fee, you receive $97,000 but repay $100,000 plus interest. The APR here is the rate at which $97,000 would produce the same payment, solved numerically. That is the fair number for comparing offers.
Payment by amount and term (10%)
| Loan | 1 year | 3 years | 5 years | 10 years |
|---|---|---|---|---|
| $25,000 | $2,198 | $807 | $531 | $330 |
| $50,000 | $4,396 | $1,613 | $1,062 | $661 |
| $100,000 | $8,792 | $3,227 | $2,125 | $1,322 |
| $250,000 | $21,979 | $8,067 | $5,312 | $3,304 |
| $500,000 | $43,958 | $16,134 | $10,624 | $6,608 |
APR with fees ($100,000, 5 years, 10% rate)
| Fee | Cash received | APR |
|---|---|---|
| 0% | $100,000 | 10.00% |
| 1% | $99,000 | 10.43% |
| 2% | $98,000 | 10.88% |
| 3% | $97,000 | 11.32% |
| 5% | $95,000 | 12.24% |
Factor rates are not interest rates
Merchant cash advances and some short-term loans quote a factor rate (for example 1.3, meaning $130,000 repaid on $100,000). Over a few months that can equal a very high APR. Convert it before comparing.
Example rates are for comparison only, not offers or current quotes. Your rate depends on credit, loan-to-value and lender.
Sources and assumptions
- APR including fees solved numerically (bisection).
- SBA: loan programs
Related
Frequently asked questions
How do I calculate a business loan payment?
With the standard amortization formula: amount × r ÷ (1 − (1 + r)^−n), using the monthly rate and number of payments.
What is a good APR for a business loan?
It depends on credit, time in business and collateral. Compare offers by APR including fees, not by interest rate or factor rate.