Guide

What does $50,000 of business funding cost on each product?

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: a few hundred dollars to about two thousand. On equipment financing over five years: several thousand in total interest, spread thin. The cheapest product is the one that fits what the money buys.

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 might cost $8,000 to $18,000 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.

Cost of $50,000, by product

BANK TERM LOAN60 months · hardest to qualify for$13,700SBA 7(A)120 months · lowest monthly, slowest$34,200ONLINE TERM LOAN18 months · days, not months$11,500LINE OF CREDIT12 months · pay only on what you draw$7,400MERCHANT CASH ADVANCE9 months · fastest, no score floor$15,000$0$36,000
Total cost of capital on a $50,000 facility, with the term stated on every bar — a comparison that hides the term is not a comparison. An advance is the most expensive money here and the only one that reaches a business the bank has already declined. Illustrative figures at mid-range pricing, not an offer.

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 several times what it costs as equipment.

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.

Sources

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.

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