Three approvals are sitting in your inbox. One quotes a factor rate, one quotes an interest rate, and one just quotes a weekly payment and stays quiet about what the money costs. They are for different amounts, different terms, and different payment schedules, and each of the three reps is telling you theirs is the best deal. At most one of them is right, and none of the paperwork is written in a way that lets you check.
This is fixable with about ten minutes of arithmetic. There is one method that puts any funding offer, advance or loan, daily or weekly or monthly, onto the same yardstick: cost per dollar borrowed. This article walks through it with worked numbers, and the offer comparison tool will run the same math on your real offers in about a minute.
Why funding offers resist comparison as written
Different products express cost in deliberately different units. A merchant cash advance quotes a factor rate, which is a multiplier on the advance, not an interest rate. A term loan quotes an annual rate that accrues over time. A revenue-based deal might quote only a payment and a payback amount. Comparing a 1.32 factor rate to an interest rate by eyeballing the numbers is not just hard, it is impossible: they measure different things over different clocks.
Some of that is honest product difference. Some of it is not: an offer that leads with a small-sounding number and buries the total payback is counting on you not doing the conversion. The fix is to stop comparing the numbers the offers chose to show you and start computing the numbers they all share.
Step one: turn every offer into total dollars out
Every offer, whatever its structure, can answer one question: if this runs to the end of its term, how many dollars leave my account in total? For an advance, multiply the advance by the factor rate. For a loan, take the full repayment schedule, principal plus all interest and fees. If the paperwork does not state the total plainly, ask for it in writing. A funder who cannot tell you the total payback in dollars is telling you something else entirely.
Suppose your three offers look like this. Offer A: a $50,000 advance at a 1.32 factor rate, remitted daily over roughly six months, so the total payback is $66,000. Offer B: a $50,000 term loan over twelve months whose full repayment schedule adds up to $58,500. Offer C: a $60,000 advance at a 1.25 factor rate, paid weekly over nine months, for a total payback of $75,000.
Step two: compute the cost per dollar borrowed
Subtract what you receive from what you pay back, and divide the difference by what you receive. That is the cost of every borrowed dollar, and it works identically on any product.
- Offer A: $66,000 minus $50,000 is $16,000 of cost. $16,000 divided by $50,000 is 32 cents per dollar borrowed.
- Offer B: $58,500 minus $50,000 is $8,500 of cost, or 17 cents per dollar borrowed.
- Offer C: $75,000 minus $60,000 is $15,000 of cost, or 25 cents per dollar borrowed.
Step three: put time back into the picture
Cost per dollar ignores how long you keep the money, and that matters. Paying 17 cents per dollar to use money for a year is very different from paying 32 cents to use it for six months. So divide each offer's cost per dollar by its term in months. Offer A: 32 cents over six months is about 5.3 cents per dollar per month. Offer B: 17 cents over twelve months is about 1.4 cents. Offer C: 25 cents over nine months is about 2.8 cents.
Time-normalized, the spread is wider than the sticker numbers suggested: the fastest-looking offer costs nearly four times as much per dollar per month as the slowest. That does not automatically make it wrong. Short, expensive money matched to a short, profitable purpose can beat cheap money you carry for a year past the need. But you can only make that judgment once the offers are in the same units, which is exactly what the comparison tool does for you.
Count what you actually receive, not what the offer says
Fees change the math more than most owners expect, because they usually come out of the money before it reaches you. Say Offer B carries a $2,500 origination fee withheld at funding. You now receive $47,500 but still repay $58,500. The real cost is $11,000 on $47,500 received, which is about 23 cents per dollar, not 17. One quiet fee moved the price by a third.
So the number that goes into your comparison is always net dollars received: the wire that actually lands, after origination, processing, professional service fees, and anything else deducted up front. The fees nobody explains have a way of living in exactly this gap, and asking for the net figure in writing is the fastest way to surface them.
The cheapest offer you cannot survive is the most expensive one
Price is the second question. The first is whether your cash flow can carry the payment every single time it hits. Offer A above works out to roughly $524 every business day. Offer B is about $4,875 once a month. Offer C is about $1,923 every week. Those are wildly different demands on a checking account, and the right answer depends on how your revenue actually arrives, not on which total is lowest.
A daily debit against lumpy monthly revenue can bounce even when the month's totals look fine, and bounced remittances bring fees and, in bad cases, default clauses. Before price settles anything, run each offer's payment through the payment affordability checker against your real revenue and existing obligations, and read what happens when payments stop clearing so you know what you are protecting yourself from.
What the math cannot see
Two offers with identical cost per dollar can still be very different deals, because contracts carry terms that never show up in the arithmetic. Before you decide anything on price alone, check each offer for the following and get the answers in writing.
- Early payoff treatment. Some products discount the remaining cost if you pay early; many advances require the full payback regardless. This single term can flip which offer is cheaper for you.
- Personal guarantee and collateral. What reaches you personally if the business cannot pay, and what a UCC filing will block later.
- Reconciliation rights. Whether the payment adjusts if your revenue genuinely drops, and how you invoke that.
- Renewal mechanics. What refinancing this deal later actually costs, since renewals are where expensive deals quietly compound.
Read the paper, not the pitch
Every one of these lives in the agreement, not in the rep's summary of it. How to read a term sheet walks the document itself, and the questions worth asking before you sign anything turns this checklist into a script for the phone call.
Run your real numbers side by side
You now have the whole method: total dollars out, net dollars received, cost per dollar, cost per dollar per month, then the payment against your actual cash flow, then the contract terms the math cannot see. None of it requires trusting anyone's sales copy, including ours.
The offer comparison tool does the arithmetic for two or three offers at once and shows them normalized side by side. It does not rank them or pick a winner, because the right choice depends on what the money is for and what your revenue looks like, and those are yours. It just makes sure that when you choose, you are choosing between numbers that are finally speaking the same language.
How to compare business funding offers
Pull the same four numbers from every offer
For each offer, write down the amount funded, every fee deducted before the money reaches you, the total payback in dollars, and the term with its payment frequency. If any of the four is not in the paperwork, ask for it in writing before going further.
Compute net dollars received
Subtract all upfront fees from the funded amount. This net figure, the wire that actually lands, is the base for every calculation that follows.
Compute cost per dollar borrowed
Subtract net dollars received from total payback, then divide by net dollars received. A $47,500 net advance with a $58,500 payback costs $11,000, which is about 23 cents per dollar.
Normalize for time
Divide each offer's cost per dollar by its term in months. This is what makes a six-month advance and a twelve-month loan honestly comparable.
Test the payment against your real cash flow
Convert each offer to its actual debit amount and frequency, then check it against your revenue pattern and existing obligations with the payment affordability checker at /tools/can-i-afford-this-payment.
Check the terms the math cannot see
Compare early payoff treatment, personal guarantees, liens, reconciliation rights, and renewal mechanics across the agreements themselves, not the sales summaries.
Put the finalists side by side
Enter the surviving offers into the comparison tool at /tools/compare-funding-offers and look at the normalized numbers together before deciding anything.
Frequently asked questions
Can I compare a factor rate to an interest rate directly?
No. A factor rate is a flat multiplier on the advance and does not accrue over time, while an interest rate does. The honest comparison is to convert both offers to total payback in dollars, then to cost per dollar borrowed, then to cost per dollar per month. At that point the original units stop mattering.
Should I just take the offer with the lowest cost per dollar?
Not automatically. Cost per dollar is the price, but the decision also depends on whether your cash flow can carry the payment schedule, whether the term matches how long you need the money, and what the contract terms like guarantees and early payoff rules commit you to. The cheapest number attached to a payment you cannot reliably make is not the cheapest offer.
What if my offers are for different amounts?
That is exactly what cost per dollar handles: it is a ratio, so a $50,000 offer and a $60,000 offer compare cleanly. The separate question is whether you need the larger amount at all, since borrowing an extra $10,000 you do not have a use for still costs real money per dollar.
Can I use one offer to negotiate another?
Often, yes. Funders and brokers know deals are shopped, and a concrete competing number is the strongest card an owner holds. Asking whether a funder can improve pricing or fees against a specific written offer is a normal business conversation, and how a rep reacts to it tells you a lot about the relationship you would be entering.
Does comparing offers I already have hurt my credit?
Doing arithmetic on paperwork already in your hands involves no new inquiry at all. New credit pulls only come into play if you submit fresh applications to generate additional offers, and whether a given application is a soft or hard pull is a question worth asking that provider before you apply.