Know the real cost before you borrow.
A plain-language guide to business financing costs and risks: how to read an offer, what to watch for and how banks, BDC, SBA and online lenders compare.
APR vs. factor rate.
The single most useful thing to understand before you sign.
APR is the yearly cost of borrowing, including interest and fees. It lets you compare any two offers on the same scale.
A factor rate is a multiplier on what you borrow. Borrow $50,000 at a factor rate of 1.25 and you repay $62,500. That sounds like 25%, but because you repay quickly, the real yearly cost is much higher:
- About 43% APR repaid monthly over 12 months
- About 92% APR repaid every business day over 6 months
- 12% APR over 24 months costs $6,488 in total on the same $50,000
Always ask for the APR, or an estimate of it, and the total you'll pay back. Every approval through PHB shows both.
Five things to check in any offer.
- Total cost of borrowingEverything you repay above the amount you receive. The clearest way to compare offers.
- Payment scheduleMonthly is easiest on cash flow. Daily or weekly payments can squeeze it, so plan for them.
- Term lengthShorter terms cost less in total but mean bigger payments. Pick what your cash flow can carry.
- Personal guaranteeMany lenders ask the owner to stand behind the debt. Know if yours does before you accept.
- Fees and prepaymentOrigination fees, early payoff terms and what happens if a payment is late.
Banks, BDC, SBA, online lenders and PHB.
Each has a place. Here's an honest comparison.
| Option | Typical cost | Speed | Paperwork | Best for |
|---|---|---|---|---|
| Banks and credit unions | Usually the lowest rates | Weeks to months | Detailed financials, often collateral | Established businesses with strong credit that can wait |
| BDC (Canada) and SBA loans (US) | Low, government-backed rates | Weeks to months | Detailed application and financials | Businesses with time to prepare and plan ahead |
| Online lenders on your own | Higher, and harder to compare | Days | Light | Speed, if you shop several lenders yourself |
| Through PHB | The lowest-cost offer that fits, recommended to you | As little as 24 hours | About ten minutes to apply | Fast funding without overpaying, with an advisor comparing for you |
If a bank, BDC or SBA loan would cost your business less, your PHB advisor will tell you.
Habits that keep borrowing healthy.
- Borrow for something that pays you backEquipment, inventory or a contract that grows revenue.
- Avoid stackingTaking a new advance to cover an old one is how debt spirals start. PHB won't arrange it.
- Keep a cash cushionLeave room in your account for the payment schedule you choose.
- Read before you signApproval is never guaranteed and terms vary by lender. Take your time; there's no obligation.
Questions, answered
What's the difference between APR and a factor rate?
APR is the yearly cost of borrowing, including interest and fees, so you can compare offers fairly. A factor rate is a multiplier on the amount you borrow (1.25 means you repay $1.25 for every $1). A factor rate looks smaller than the APR it equals, because you repay quickly.
What does total cost of borrowing mean?
Everything you'll pay back above the amount you receive: interest plus any fees. It's the clearest way to compare two offers with different terms.
Is a shorter term cheaper?
A shorter term usually means less interest in total, but higher payments. Choose the term your cash flow can comfortably carry.
Do you arrange merchant cash advances?
No. PHB doesn't arrange merchant cash advances, and we won't place a new loan just to cover an existing one. If a lender's terms include daily or weekly payments, we flag it and show you what it means for your cash flow before you accept.
Will checking my options affect my credit?
Checking your eligibility never involves a credit check. A lender may run a full credit check when it reviews your application; we ask you first and tell you which lender it is.
Do I have to sign a personal guarantee?
Many business lenders ask the owner to personally guarantee the financing, especially for newer businesses. If an approval includes one, we tell you before you accept and explain what it means for you.
Fast funding, without overpaying.
See if you qualify in under a minute. Every approval shows its full cost before you accept.
