Beyond the rate, a Searcy, AR owner can compare the fees in dollars, the term, the total of all payments, how often payments are taken, and what happens on early payoff or renewal. Two offers with close rates can end thousands of dollars apart once fees and term are counted, as the invented example below shows.
Total cost first, then payment frequency, then prepayment and renewal, then a list of questions to ask in writing.
Rate, fees and term: three numbers that move total cost
The rate decides what each dollar costs per year, the term decides how many years it is paid for, and the fees are charged whether or not the money is used for long. An offer can lead on one of the three and lose on the total.
| Offer | Term | Fee at closing | Annual rate | Monthly payment | Total of payments | Interest plus fee |
|---|---|---|---|---|---|---|
| A | 84 months | $2,250 | 8.75% | $1,197.19 | $100,563.96 | $27,813.96 |
| B | 48 months | $750 | 10.25% | $1,911.21 | $91,738.08 | $17,488.08 |
Offer A has the smaller rate and the smaller payment, $714.02 a month under B. Over its longer term, though, interest plus fee comes to $10,325.88 more than B. If each fee comes out of the funds at closing, A puts $72,750 in the account and B puts $74,250.
Check what a quoted rate includes, too. A note rate leaves the fees out, while an APR folds them in, so the same loan can be quoted with two different figures. An offer priced with a factor instead of a rate can be judged as total payback in dollars set beside the amount the business receives.
Daily, weekly or monthly payments and cash flow
Payment frequency changes when money leaves the account, and it can change how much leaves in a year. A weekly payment of $600 sounds like $2,400 a month, but 52 weekly payments come to $31,200 a year, $2,400 more than 12 monthly payments of $2,400, because a month averages about 4.33 weeks, not 4.
In White County, AR, 1,431 of the 1,637 employer establishments in the 2023 County Business Patterns had fewer than 20 employees (87.4%). In a business that size, a weekly or daily debit comes out of the same account as payroll and supplier bills, so test any schedule against the weakest week of deposits, not the average.
Prepayment terms and renewal clauses
Illustration only, invented figures: a loan with a 2% prepayment penalty in its first year, paid off early with $30,000 still owed, costs $600 to close. Penalties can also take the form of a declining percentage, a minimum interest amount, or, on fixed-cost products, no saving at all for paying early.
Renewal clauses deserve the same attention. A term loan renewed or refinanced before it ends can roll the remaining balance into a new loan with a new fee. A line of credit can renew on a review date with changed terms. A merchant cash advance is not a loan, but a new advance taken before the first is delivered can charge its cost again on money the business already had. Before any early payoff or renewal, a written payoff statement shows the balance, the penalty and any fee in one place.
Questions to ask before signing in Searcy, AR
Before signing any offer from the business loan options a Searcy, AR owner is weighing, get the answers in writing:
- What is the total of all payments, and what are the fees, in dollars?
- Are fees deducted from the funds, or paid separately?
- Will payments be debited weekly, daily or monthly, and from which business account?
- Is there a prepayment penalty, and how is it figured?
- What happens at renewal or refinancing, and is a new fee charged?
- Does the offer call for an owner's personal guarantee, a blanket lien on business assets, or both?
No two partners price a request the same way, and Greenford only passes it along; the offer and its terms come from the partner. The online request starts that review, and more posts are on the blog.
By Greenford Advances · Updated
