When you receive two financing offers for your business, the smaller payment can look like the better choice. But the payment shown in an offer may leave out a setup fee or other money you have to pay. It also might be due every week instead of every month.
Before choosing, compare how much money your business will actually receive, how much it must pay back altogether, and when each payment is due. Make sure both offers cover the same amount of money and the same period. Then look at the written terms to see what could change after you sign.
Start with the money your business will receive
Suppose a lender approves $100,000. You might expect to have the full $100,000 available to pay suppliers, buy stock or cover payroll. That depends on how the offer handles its fees.
Some lenders charge a setup fee that you pay separately. Others may take a fee out of the amount they send you. If a lender approves $100,000 and keeps $3,000 before sending the funds, your business receives $97,000, even though the agreement may still require repayments based on the approved amount.
That difference matters if you need exactly $100,000 to cover a bill. You would need to find the missing $3,000 somewhere else, or ask whether a different funding amount is possible. Write down the amount your business can actually use, not only the number on the approval letter.
Add up everything you have to pay
A business financing offer may include interest, a fixed financing charge, a setup fee, renewal fees or other costs. Interest is generally a charge for borrowing money over time. A fixed financing charge may be stated as one amount for the agreement. How these charges are calculated depends on the product and contract.
If a lender quotes an annual interest rate, that number by itself does not tell you the full dollar cost. You also need to know how long the financing lasts, how the balance falls as you make payments, and what fees apply. A fixed fee is different from an annual interest rate, so you should not compare the two as though they mean the same thing.
Ask for a payment schedule showing every required payment. If there are separate charges, add those too. For an offer with equal payments, the basic calculation is:
Number of payments × amount of each payment + separate required fees = total cash paid.
If your business receives the full funding amount, subtract that amount from the total paid to see the financing cost in dollars. That simple calculation does not produce an annual percentage rate. It also does not account for the value of having the money on different dates.
Example: The lower monthly payment costs more overall
Imagine a Canadian business comparing two made-up offers. Both would put $100,000 into its bank account, and both require 12 equal monthly payments. The extra fee in each example is paid separately, rather than deducted from the funding.
| Offer A | Offer B | |
|---|---|---|
| Cash the business receives | $100,000 | $100,000 |
| Monthly payment | $9,200 | $9,000 |
| Number of payments | 12 | 12 |
| Total scheduled payments | $110,400 | $108,000 |
| Separate required fee | $500 | $4,000 |
| Total cash paid | $110,900 | $112,000 |
| Cost above the cash received | $10,900 | $12,000 |
Offer A: 12 × $9,200 + $500 = $110,900 paid. After subtracting the $100,000 received, the cost is $10,900.
Offer B: 12 × $9,000 + $4,000 = $112,000 paid. After subtracting the same $100,000 received, the cost is $12,000.
Offer B asks for $200 less each month, but costs $1,100 more overall in this example. That lower payment might still be easier for a business to manage in a tight month. Choosing between real offers means considering both the total cost and whether the payment schedule works with your cash coming in.
These figures are illustrative only. They are not BGC rates, lender quotes or typical offers. They assume no other fees, 12 equal monthly payments and the same $100,000 received at the start. Actual agreements may use different rates, charges and payment dates.
Check when the payments leave your account
A business can have enough sales over a month and still run short of cash in the middle of it. This happens when bills come due before customers pay. Financing payments become another bill to plan for.
Suppose a business usually receives most of its customer payments near the end of each month. An offer that takes money from its account every Friday may create pressure during the first three weeks, even if its total repayment is affordable over the full month.
Look at your next several weeks of expected customer payments, payroll, rent and supplier bills. Then place the proposed financing payments on the same calendar. If the lowest projected balance goes below zero, the schedule may be difficult to manage without another source of cash. Our guide on how much working capital a business needs shows how to build that kind of forecast.
Daily, weekly and monthly payments are not interchangeable just because their totals look similar. The exact due dates matter, and some agreements may require automatic withdrawals.
Check what could change after you sign
The first payment schedule is important, but it may not tell you everything about the agreement. Some financing arrangements have variable rates, meaning the interest rate can change. Others may include renewal costs or rules about paying off the balance early.
Before accepting an offer, ask the lender to show you where the agreement explains:
- Rate changes: Can the charge or rate change, and what would cause that change?
- Early repayment: If you repay sooner, do the remaining charges change, or could there be a fee?
- Renewal and ongoing costs: Are there charges to renew, maintain or keep a credit line open?
- Security and guarantees: Is the business offering assets as security, or is an owner personally responsible if the business cannot pay?
- Missed payments: What happens if a payment is late or the bank account has insufficient funds?
Security means property or other assets a lender may have rights to if a borrower does not repay. A personal guarantee is a promise by an individual to cover an obligation under the agreement's terms. Both deserve careful review because they can affect more than the monthly payment.
Different products have different rules. For instance, a business line of credit may let a company borrow again as it repays, depending on its terms, while a business term loan usually provides an amount upfront with a repayment plan. Our line of credit versus term loan guide explains that product choice. Here, the goal is to compare the actual cost of the offers in front of you.
How do you make a fair comparison?
Try to put both offers on one sheet with the same headings: cash actually received, every fee, the amount and date of each payment, total cash repaid and important contract conditions. If one offer lasts 12 months and another lasts three years, their total costs alone do not settle the decision. They give you money for different lengths of time.
Ask the lender to explain any fee or payment you cannot identify. If offers use different amounts, payment periods or pricing methods, ask for a comparison based on the amount you need and the time you expect to use it. A finance or accounting adviser can help with more complex agreements.
Better Growth Capital is a Canadian business financing broker. We review business financing requests and may share an application with selected funding partners, who make their own lending decisions. You can learn about business financing options, speak with our team by phone, or apply for financing if you want us to review your request. BGC cannot promise an offer, a specific cost or approval.
Sources
- BDC — Business loan calculator. Explains how amount, rate and term affect a model repayment schedule, with limits to illustrative calculations.
- BDC — Small Business Loan. Shows that fees and repayment conditions can differ across loan amounts and agreements at a Canadian lender.
- Innovation, Science and Economic Development Canada — Helping small businesses get loans. Describes fees and interest rules for the Canada Small Business Financing Program only; these are not BGC product terms.
This guide is for general information and does not replace financial, legal or accounting advice. Financing costs, repayment terms and eligibility depend on the actual agreement and lender.