It depends entirely on the product. Revenue-based funding is priced with a factor rate — a fixed multiplier, often 1.15 to 1.50 — while term loans and SBA products use interest rates that accrue on the outstanding balance. The two cannot be compared without converting both to a total cost in dollars.
Compare total dollars, not rates
The only reliable comparison is what leaves your account in total, and over what period. Take each offer, work out the total repayment and the payment amount, and put them side by side. A lower headline number over a much shorter term is frequently the more expensive option.
Then check the payment against your actual weekly cash position, not against the total. Most funding that goes wrong goes wrong on the payment schedule rather than the price.
Fees to ask about
Origination or administrative fees, usually deducted from the amount advanced, so the money that arrives is less than the figure quoted.
Broker fees. Silverback charges none — but they are common in this market and worth asking about explicitly wherever you are quoted.
Early payoff terms. Whether repaying early reduces the cost, and by how much.
Default and late terms, which vary considerably between agreements.
What makes the price move
Time in business, deposit consistency, average balance, account conduct, industry, and existing obligations. Almost all of it comes down to how predictable the deposits look. The same business can be priced quite differently depending on how well the file is put together — which is why the statements you submit matter as much as the numbers in them.
Questions worth asking on every offer
What is the total repayment in dollars, and over how many payments? This single question makes any two offers comparable regardless of how they are priced.
Is anything deducted before the money arrives? Origination and administrative fees are often taken from the advance, so the amount that lands can be several percent below the figure quoted.
Is there an early payoff discount, and what exactly does it save? On factor-rate funding the answer is sometimes nothing at all, which is worth knowing before you plan on repaying early.
What happens if a payment fails? Fee structures for missed payments vary widely between agreements and are rarely mentioned unless asked about.
And are there broker fees? Silverback charges none, but they are common in this market and the question is always worth asking wherever you are quoted.
Read next: What is a factor rate? · Business line of credit · SBA & term loans
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