The Green Sheet Online Edition
November 24, 2025 • 25:11:02
What businesses need to know before accepting fast capital
Gone are the days when borrowers had to wait weeks for a lending decision. Fast capital is here, and companies can often be approved for funding in minutes. Fintech lenders are more numerous than ever. However, many companies focus more on obtaining fast lending than on comparing the offers in front of them.
You won't be surprised to learn that some lenders are not as transparent as they should be. The information borrowers need is technically available, but often quite hidden. This article provides an overview of factors to consider when determining which borrowing option is right for a business. Only by comparing the true costs of loan offers can a business owner make an informed decision.
Factor rates
Many lenders have moved away from interest rates in favor of factor rates. Factor rates, displayed as decimals, tell you exactly how much you'll repay, and they don't change over the life of the loan. For example, if a business borrows $10,000 at a factor rate of 1.2, it repays $12,000, which includes fees of $2,000. Factor rates are often easier to compare than interest rates. With one calculation, you'll know the total cost. They're most common in shorter-term borrowing and nontraditional (nonbank) lending.
Fees
Most lenders charge fees, and some bury this information, so borrowers must search for it. A few lenders are not as transparent as they should be on this front.
If a lender offers a far lower repayment amount than competitors, hidden fees may be involved, especially when working through a loan broker. Borrowers must factor these costs into the total repayment amount, since they are often not included in the quoted factor rate.
Repayment structures
Repayment structures determine how much a borrower must pay and when. Most loans have fixed repayments, so the borrower always knows the amount due. Other loans, including cash advances from payment processors, do not have fixed repayments. Borrowers pay based on receipts. Tough months mean lower repayments, and strong months mean higher ones. Still, even these products require a minimum amount to be repaid by a set date. Repayment structures matter because borrowers must be confident they can keep up with them. Failure to meet a repayment plan can impact long-term financial health.
Evaluating offers from fintech funders
It is essential for a business to choose the right borrowing option. The wrong one can be costly, reduce future borrowing potential or even undermine the business.
Several factors come into play. First, determine the true cost of the loan. Cheaper is better, but sometimes a slightly more expensive loan offers more manageable repayment terms. A low-cost loan may sound ideal, but if a business cannot meet the repayment schedule, a higher-cost option with better terms may be the wiser choice.
Fast capital may be fast, but decisions should never be rushed. Businesses should take the time to compare lenders to ensure they secure the borrowing option that best fits their needs.
Note: I referred to the following in researching this article: www.nerdwallet.com/article/small-business/factor-rate and fastercapital.com/topics/questions-to-ask-when-choosing-a-lender.html.
Chad Otar is CEO of Lending Valley Inc. For information about the company, please visit www.lendingvalley.com. To reach Chad, send an email to chad@lendingvalley.com.
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