Guide · What it costs
What does $50,000 of business funding cost on each product?
By Alex Makowski Updated
On a merchant cash advance at a typical 1.25 to 1.35 factor: $12,500 to $17,500 of cost over roughly six months. On a short-term working capital loan: often similar, sometimes less if priced as interest and repaid early. On a line of credit drawn for three months at a mid-teens rate: roughly $1,500 to $2,500 of interest, plus any fees. On equipment financing over five years: $12,000 to $17,000 in total interest, a few thousand a year. The cheapest product is the one that fits what the money buys.
In this guide
- 01The four numbers, worked
- 02Why the cheapest product is not always the answer
- 03How to compare two offers for the same job
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01
The four numbers, worked
Merchant cash advance, $50,000 at 1.3 over six months: $65,000 back, $15,000 of cost, about $516 every business day. At 1.2 it is $10,000; at 1.45, $22,500. Where you land depends on your deposits and history, not your credit score.
Working capital loan, $50,000 over nine months: priced either as a factor, in which case it looks like the advance, or as interest at rates that in this market commonly run from the twenties to the fifties annualized, in which case nine months of daily or weekly repayment costs roughly $4,000 to $10,000, because the balance falls as you pay, and repaying early saves real money.
Line of credit, $50,000 drawn for ninety days at a mid-teens rate: roughly $1,500 to $2,500 of interest, plus any draw or maintenance fees, and nothing when undrawn. Harder to qualify for; this is why it is worth having.
Equipment financing, $50,000 over five years at a rate in the high single digits to low teens: total interest in the range of $12,000 to $17,000 over the whole five years, or a few thousand a year, on an asset that is working the whole time.
| Product | How it is priced | Term in this example | Cost on $50,000 | Total repaid | How repayment works |
|---|---|---|---|---|---|
| Merchant cash advance | A fixed factor rate, set at signing | About six months | $15,000 at a 1.3 factor ($10,000 at 1.2, $22,500 at 1.45) | $65,000 at 1.3 | Daily or weekly debits; about $516 each business day at 1.3 |
| Working capital loan | A fixed factor, or interest commonly in the twenties to fifties annualized | Nine months | Roughly $4,000 to $10,000 if priced as interest; close to the advance if priced as a factor | About $54,000 to $60,000 if priced as interest | Daily or weekly; repaying early saves money only when the cost is interest |
| Business line of credit | Interest on the drawn balance at a mid-teens rate, plus any draw or maintenance fees | Drawn for 90 days | Roughly $1,500 to $2,500 of interest, plus fees | About $51,500 to $52,500 for that draw | Repay the draw and draw again; nothing accrues while undrawn |
| Equipment financing | Interest in the high single digits to low teens, secured by the equipment | Five years | $12,000 to $17,000 in total interest | $62,000 to $67,000 | Monthly payments over the term |
Cost of $50,000, by product
02
Why the cheapest product is not always the answer
The equipment loan is cheapest per year because it is secured by a machine and lasts five years; it cannot fund payroll. The line is cheap because it is drawn for weeks; it needs two years of clean statements you may not have yet. The advance is the most expensive because it is unsecured, fast and available to businesses the others decline. Each is priced for its job. The expensive mistake is using the fast product for the long job — a $50,000 machine on a six-month advance costs about as much as five years of equipment financing, packed into six months of daily payments instead of spread across sixty monthly ones.
03
How to compare two offers for the same job
Total repayment minus amount received, fees inside, for each. Then the term, because the same cost over a longer term is a smaller payment and a lower annualized rate. Then whether the cost is fixed or accrues, because that decides whether repaying early saves anything. The calculator on this site takes an amount, a factor and a term and shows the number.
Written by
Alex Makowski, Owner
Alex Makowski owns and runs Business Loans for America and has been placing funding for U.S. small businesses since 2021. Businesses he has worked with have secured $50M+ in financing across 1,200+ placements. He writes and reviews every guide on this site.
FAQ
Related questions.
- Why is the working capital loan sometimes the same price as the advance?
- Because in this market many products called loans are priced with a factor and repaid daily, exactly like an advance. The name on the contract matters less than whether the cost is a fixed factor or accruing interest.
- Can I get $50,000 on $40,000 a month in deposits?
- Usually, at the upper end of what deposits carry. Offers run half to one and a half times a month's deposits, so $20,000 to $60,000 is the typical range on $40,000.
- Is the cost tax-deductible?
- The cost of business financing is generally a deductible business expense, whether it is called interest or a factor. Ask your accountant how it is treated on your return.
Guides
More on what it costs
Short term or long term
Longer usually costs more in total and less per week. The right answer is the longest term whose total you can stomach.
The price of equipment money
Close to bank pricing for a strong file, into the twenties for a startup or a low score. The machine is why.
Lower factor, not always cheaper
A 1.2 with high fees and a four-month term can cost more per month than a 1.3 over ten. Compare in dollars.
Worse than advertised
Files are graded A to D on deposits, balance and history. The advertised rate is the A grade. Most files are not A.
What is negotiable
The factor moves a little. The term, the payment frequency, the fees and the amount move more. Ask before signing, never after.
The renewal trap
A $20,000 renewal that retires a $14,900 balance puts $5,100 in your account and charges the factor on all $20,000.
Sources
- IRS — Small Business and Self-EmployedFederal tax guidance for small businesses, including recordkeeping and deductions.
- Consumer Financial Protection BureauFederal consumer-finance regulator. Publishes guidance on credit terms and disclosure.
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