Is a lower factor rate always the cheaper offer?

Offer A: $50,000 at 1.20, 5 percent origination, four months. You receive $47,500, you repay $60,000. Cost: $12,500, about $714 every business day.

Offer B: $50,000 at 1.30, no fees, ten months. You receive $50,000, you repay $65,000. Cost: $15,000, about $310 a day.

A is $2,500 cheaper and takes more than twice as much out of the account every day. A business with strong daily deposits and a fat balance should take A. A business paid weekly or in draws should take B and not think twice, because one bounced debit on A costs more than the $2,500. The factor alone would have said A. The whole picture says it depends on the account.

Dollars received, after every fee. Total repayment. The term and the payment it produces. Whether the cost is fixed at signing or accrues over time — because if it accrues, an offer that looks more expensive can be cheaper the moment you repay it early, and if it is fixed, early repayment saves nothing.

Fees off the top are the one people miss. A factor applied to the gross amount while you receive the net is a hidden increase in the factor: 1.20 on $50,000 when you received $47,500 is really 1.26 on what you got.

Ask each funder for one page: amount received, total repayment, term, payment frequency and amount, every fee, and the early-payment terms. Put the pages next to each other. The calculator on this site does the arithmetic for any three numbers. And in a dozen states the funder must give you a standardized disclosure with exactly these figures; ask for the same format anywhere.