"I've been approved, but the interest is too high and I don't like the repayment terms." That is a common reaction. It deserves a straight answer, not a sales pitch. Sometimes the offer is fine and just unfamiliar. Sometimes it really is a poor fit. This page helps you tell which one you are holding.
Two questions that get mixed up
Most of the frustration comes from treating two separate things as one:
- Payment frequency is about timing. Daily, weekly, biweekly or monthly decides how the repayment feels inside your week.
- Total cost is about money. It is the dollars you repay beyond what you received, and how quickly you repay them.
An offer can have a schedule that suits you and a price that does not, or the reverse. Judge them one at a time, then together.
Why the payment schedule looks the way it does
Alternative business funding is often weighed heavily on cash flow and credit history, especially what actually comes into your business account and when. That is why a funding source reviews your recent business bank statements, and why the payment schedule often follows the same pattern.
| Business | How money arrives | A schedule that might be offered |
|---|---|---|
| Restaurant or beauty salon | Card and cash receipts every business day | Smaller daily payments rather than one large monthly payment |
| Commercial cleaning company | Clients pay once a month | Monthly or biweekly payments, depending on when client money lands |
A $5,000 payment due on the first of the month is hard on a restaurant that earns its money in $3,000 pieces. A $240 payment each business day may fit that rhythm better, even though it takes a little from every day. In the same way, a cleaning company that is paid monthly can find daily withdrawals out of step with its deposits.
A funding source that has approved you has already looked at the business bank statements in your file, so any schedule it proposes is usually informed by the cash flow it saw. Whether that schedule fits you is a separate question.
Be careful with "the funder will match your cash flow"
Matching is common in this industry, but it is not automatic. Whether a schedule lines up with your revenue depends on the specific product, the funding source, its underwriting and the agreement. Daily or weekly payments can be required even when they are inconvenient for you. If the schedule does not fit how your business earns money, that is a fair reason to ask questions, to compare another offer, or to say no.
"Interest rate" versus "factor rate"
This is the second source of confusion. Different products price themselves in different ways.
| Product type | Usually priced as | What to check |
|---|---|---|
| Term loan or line of credit | An interest rate or APR, a percentage per year | Rate, term, fees, payment schedule |
| Merchant cash advance (typically structured as a purchase of future receivables rather than a loan, though how it is classified can vary by state and agreement) | A factor rate, a multiplier such as 1.25 | Total repayment, payment amount and timing, fees, any prepayment terms, how payments respond to slow periods |
| Other receivables-based financing | Varies: a fee, a discount or a factor | Read the agreement; do not assume it works like a loan |
How a product is classified in law can vary, and some states require written disclosures on commercial financing offers that may include an estimated annual rate. See our state disclosure guide for what applies where. This page is general education, not legal advice.
A factor rate, in dollars
Think of a factor rate as a price tag on the money. Buy a $100 jacket with a $25 markup and you know before you reach the register that the bill is $125. A factor rate works the same way: it is multiplied by the amount you receive, and the price is set before you sign.
$62,500 minus $50,000 = $12,500 difference
That $12,500 is before any fees or agreement-specific adjustments, which you should look for separately. The number is useful because it is concrete. It is also incomplete, because it says nothing about time.
A fixed price tag cuts both ways. It tells you the dollars up front. It also means that, in many factor-rate agreements, paying faster does not automatically shrink the total. Whether early payoff lowers the cost depends on what the agreement says, which is why it is a question to ask before you sign (more on that below).
Why 1.25 is not the same as 25%
A 25% annual interest rate means 25% per year on a balance that shrinks as you repay it. A 1.25 factor rate means a fixed $12,500 on $50,000, no matter how long repayment takes. The faster you repay, the more that fixed amount weighs against the money you actually had the use of.
This is an illustration, not a real offer. Using the same $50,000 and the same 1.25, and assuming equal payments each business day, a 260-business-day year and no fees. This section is an educational comparison of factor rate and annualized cost, not an advertised rate; the annualized figure is a nominal annual rate from the internal rate of return of the equal payments:
| Repayment term | Daily payment | Total repaid | Approximate annualized cost |
|---|---|---|---|
| 6 months (130 business days) | about $481 | $62,500 | about 92% |
| 12 months (260 business days) | about $240 | $62,500 | about 46% |
| 18 months (390 business days) | about $160 | $62,500 | about 31% |
For comparison, a conventional $50,000 loan at 25% APR repaid in 12 equal monthly payments costs about $7,027 in interest. The 1.25 advance costs $12,500 for the same $50,000. Those are not the same thing, which is why treating a factor rate as an APR can mislead. Our factor rate to APR converter turns your own numbers into an approximate annual figure, and our factor rate guide goes deeper. An approximate annualized figure helps you compare, but it is a comparison tool, not the legal APR on your agreement.
Payment frequency changes the feel, not the total
On the same $62,500 repaid over 12 months, a daily, weekly or monthly schedule repays the same total. The annualized figure differs slightly because less frequent payments return the money more slowly, and what really changes is how the payments land on your cash flow.
| Schedule | Payment | Number of payments | Approximate annualized cost |
|---|---|---|---|
| Daily (business days) | about $240 | 260 | about 46% |
| Weekly | about $1,202 | 52 | about 46% |
| Monthly | about $5,208 | 12 | about 43% |
Do not decide that an offer is cheap or expensive because of how often it debits. Frequency is about timing. Read cost in the total repayment and the term. For the day-to-day effect of each schedule, see daily versus weekly payments, and for the mechanics, how repayment works.
How to tell whether an offer is affordable
Affordability is a comparison between the payment and your real cash flow. Do it with your own numbers.
Treat this as a worksheet. Copy it onto paper or print the page, and fill in the last column from your own offer before you decide.
| Question | How to check | Your figures |
|---|---|---|
| What is the total repayment? | Find the stated repayment amount and subtract what you receive. That is the cost in dollars, before fees. | |
| What is each payment, and how often? | Divide the total repayment by the number of payments, then confirm it matches the agreement. | |
| What share of your deposits is that payment? | Add the new payment to what you already pay out, then divide by your typical deposits for the same period. Repeat the test for your slowest weeks, not your best month. | |
| Are there fees? | Look for origination, administrative or other charges that add to the real cost. | |
| What if sales slow down? | Find how the agreement treats a slow period. Some payments are fixed; some adjust with receipts. Do not assume which. | |
| Is there a prepayment provision? | Some agreements offer a discount for paying early and many do not. Check the document, and see our prepayment guide. | |
| What must the money accomplish? | If you cannot say how it will help the business earn enough to repay it, pause. |
A worked example, with invented numbers. A restaurant that deposits about $3,000 per business day and faces a $240 daily payment is committing roughly 8% of those deposits. A cleaning company paid about $40,000 a month that faces a $5,208 monthly payment is committing roughly 13%. These are not recommendations or benchmarks, and a low share does not by itself make a payment affordable: weigh it against your margins, not only your deposits. They show how to put a payment in proportion to your own deposits, which is the more useful number than any headline rate.
Longer terms, early payoff and renewals: what to look for
Not every business funding offer is a six-to-twelve-month sprint. Repayment can run from a few months to several years depending on the product, and some programs available through our funding partners describe terms of up to five years. A longer term usually means smaller payments. It also means more time paying, so compare the total as well as the payment. Which products, amounts and terms you can get depends on your business and on underwriting.
| Topic | What to know | What to ask |
|---|---|---|
| Longer terms | Some products spread repayment over years instead of months. The upside is smaller payments. The tradeoff is more time paying and, often, a larger total. | Is there a longer-term option for my file, and what is the total at each term? |
| Paying early | Some funding agreements give you a discount when you pay off early. Others do not. If the discount is written into your agreement, paying early can save you money. If it is not, you generally owe the stated amount. | Is there a prepayment discount, how is it calculated, and is it in the agreement? See our prepayment guide. |
| Renewal or more funding | Some programs will consider a business for additional financing after about 35% of the current obligation has been repaid. Requirements differ by program, and being considered is not the same as being approved. | What would I need to qualify for more funding, and when? See our renewal guide. |
More than one kind of financing
T.A.G. Business Funding connects business owners with more than one kind of financing. Through participating funding partners, options can include merchant cash advances, revenue based financing, working capital products, business loans and, when the business and circumstances fit, SBA loan opportunities. Amounts run from about $10,000 up to $5 million, depending on the partner, the product, eligibility and underwriting. Not every business qualifies for every product or amount. We are an independent ISO and broker, not a lender and not the SBA.
The lawn-care lesson: how financing and taxes fit together
Say you run a lawn-care business. Spring is coming, and you want a faster commercial mower and a helper so you can take on twice as many yards. A funding partner gives you $10,000 today, and you agree to pay back $12,500 over time. Three different things are happening here, and tax time treats them differently.
- The $10,000 you receive is not income. You did not earn it mowing lawns, and you have to give it back. The IRS says money borrowed through a bona fide loan is not income. If your funding is structured as a purchase of your future sales instead of a loan, the accounting can work differently, so check how yours is written.
- Paying back the $10,000 is not a write-off. That part is simply returning what you were handed, like returning a borrowed tool.
- The extra $2,500 is the cost of using the money. Costs of financing, such as interest and fees, are often deductible as a business expense. The details matter: how your agreement is classified, whether you use cash or accrual accounting, and which year each cost belongs to. The IRS says prepaid interest is spread over the years it covers, and some businesses face limits on how much business interest they can deduct.
The mower is a separate question. Buying equipment is a different line from financing it. Many purchases are deducted over several years through depreciation, and some can be deducted faster under rules such as Section 179, with limits. So the mower is not always written off in full the day you buy it.
Keep the agreement, your bank statements and every receipt. Your accountant will split each payment into money back and cost, and that split is where the deduction comes from. Show the agreement to a CPA before you count on a number, because the right answer depends on your agreement and your business. This is general education, not tax advice.
Can the terms be changed?
Sometimes they can be discussed, but you should not count on it. Many offers are fixed. A funding source may adjust an amount, a term or a payment only if its program and your file allow it, and it decides, not T.A.G. Ask your questions before you sign, in writing where possible, and treat an answer you cannot get as information. Once an agreement is signed it controls. For what is usually and rarely negotiable, see our negotiation guide.
If you hold more than one offer, put them side by side with the offer comparison tool. The pre-signing checklist and contract guide show what to read before you commit.
Accept, ask, reconsider or decline
- Accept when you understand the total repayment, the payment and the term, the payments fit your slowest weeks, and the money has a clear job.
- Ask when one thing is unclear or looks off. A funding source that cannot explain a term is telling you something.
- Reconsider if the amount is smaller than you hoped. Our guide to being approved for less than requested covers that case.
- Decline if the payments strain operations, you cannot explain how the funds will repay themselves, or you feel pressure to take something. Declining is a legitimate business decision.
Nobody should rush you into accepting an offer.
If you are earlier in the process
T.A.G. Business Funding is an independent ISO and broker, not a direct lender. We collect your application and your bank statements, present the file to funding sources, and help you read the offers that come back. We do not underwrite and cannot promise approval, an amount, a rate, a payment schedule or a deadline.
A complete application includes a signed T.A.G. application, the four most recent consecutive, complete BUSINESS bank statements (all pages, not redacted; personal statements do not count), and accurate information about a business with a real funding need. A funding source may ask for more. See the application checklist and which statements count before you start.
Frequently asked questions
Why are my business funding payments daily?
Many alternative funding products schedule payments around how money comes into the business, so a business with daily card receipts, such as a restaurant or salon, may be offered smaller daily payments. This is not guaranteed. The schedule is set by the product, the funding source and the agreement, and daily or weekly payments can be required even when they are inconvenient. Read the schedule before you sign.
What does a 1.25 factor rate mean?
A factor rate is multiplied by the amount you receive to get the stated repayment amount. At 1.25, a $50,000 advance has a stated repayment of $62,500, a difference of $12,500, before any fees or agreement-specific adjustments. The factor rate alone does not tell you the annual cost, because the repayment term changes that.
Is a factor rate the same as interest?
No. Interest is a percentage charged over time on a balance, usually quoted as an annual rate. A factor rate is a fixed multiplier applied once to the amount funded. Because it is not tied to time, a 1.25 factor rate is not the same as a 25% annual rate. The same 1.25 over six months costs far more per year than over eighteen months.
Why is my merchant cash advance so expensive?
Cost depends on the factor rate, how quickly the stated repayment amount is paid back, and any fees. A short repayment period makes the same factor rate far more expensive on an annualized basis. Compare total repayment, the payment amount and the term, and convert the offer to an approximate annual rate before you decide.
Can a business funding repayment schedule be changed?
Sometimes it can be discussed before you sign, but it is never guaranteed. The funding source decides whether any term is adjustable, and many offers are take it or leave it. After signing, the agreement controls. T.A.G. is an independent ISO and broker, not a lender, and cannot promise a different schedule or price.
Should I accept a business funding offer?
Accept it only if you understand the total repayment, the payment amount and frequency, the term and the fees, and the payments fit your slowest weeks, not just your best ones. An offer being available does not make it the right offer. Declining is a legitimate decision.
Can business funding last longer than a year, and can I pay off early, renew or deduct the cost?
Repayment can run from a few months to several years depending on the product, and some programs describe terms of up to five years. Some agreements give a discount for paying off early and others do not, so check your agreement. Some programs will consider a business for additional financing after about 35% of the current obligation is repaid, but being considered is not an approval. The money you receive is not income and repaying the original amount is not a deduction, while the cost of financing is often a deductible business expense. How that works depends on how your agreement is classified and your accounting method, so confirm it with a CPA.