DISCLAIMER: This calculator comparison chart is provided for general reference purposes only. It is not in any way intended as a loan application, it is not a quote for finance or any indication that an application has been received or approved. The repayments quoted may not include all the fees and charges that may be applicable. The interest rates and the repayments displayed do not account for any conditions pertaining to your individual loan application. Therefore, the interest rate and repayment you may be offered may vary from the amount shown.
When planning to take on a business loan, the interest charged on the loan is a major cost consideration. The interest, based on the rate applied over the term, determines the repayments which can impact cash flow, the total cost of the finance and the purpose of the loan. Fully understanding the rate and the total interest payable on the loan, can be extremely important in making informed decisions.
While most interest rates are advertised as fixed or variable and can be used with our calculators to obtain estimates, these rates do not include, or account for, all the fees and charges applicable to the loan. Adding to the confusion of working out total interest and total loan costs, some business finance lenders use what is known as a factor rate rather than an interest rate.
We provide this brief explainer and our experts are available by phone or online contact to clarify specifics for your individual loan requirements.
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Navigating the terminology with business finance can be challenging, especially with the terms relating to interest rates. A number of different ‘rate’ terms can be used by lenders and knowing exactly what these terms mean can be important to borrowers. Basing finance decisions on interest rates can impact the cost of the loan and the cost of the purchase or purpose.
When applying for finance, most business operators will be familiar with comparing interest rates as displayed or advertised by lenders. This is typically an annual rate which is either fixed or variable and does not include all the fees and charges applicable to a specific loan application. This interest rate is shown as a percentage.
The main reason that advertised annual interest rates do not include all charges is that the fees charged by lenders on different loans can vary. Fees and charges also vary with different lenders. As a broker, we are accredited with over 80 lenders. Until we select the right lender to match each customer’s profile and requirements, the specific fees on that loan are not known.
While an advertised interest rate applies to most types of commercial credit facilities, for some business loan products such as shorter-term loans, some lenders will quote a factor rate rather than an interest rate. A factor rate is expressed as a decimal such as 1.1, 1.5 or 1.3.
This factor rate is the amount of the total loan that the borrower will need to finalise the loan amount requested. If a 1.10 factor rate is quoted on a $50,000 finance application, then the borrower pays 110% of the $50,000, that is $55,000 to finalise the borrowing.
As with the interest rate percentage, factor rates also do not include all lender fees and charges. To ascertain the complete interest rate cost of a loan, business operators will require the APR, or annual percentage rate.
The APR is expressed as an annual percentage and includes the interest rate or factor rate, plus the relevant fees and charges and compounding effects. This rate provides borrowers with the exact cost of their finance on an annual basis.
The APR is the most workable rate to use to compare loan offers. So obtain this rate when quoted a factor rate, it is important to have access to our factor rate to APR calculator.
Using our specialist business finance services may simplify and clarify any confusion around different types of loan rates. We will source you the best rates and provide a specific quote with a complete and clear explanation of inclusions.
Factor rates typically apply to short term loans of 6 month to 12 month repayment terms and are represented as decimal values rather than percentages. This factor rate is the amount of the total loan requested that needs to be repaid.
To assist business operators to convert factor rates to annual percentage rates (APR) to assess their finance costs and compare loan offers, we have provided a convenient online factor rate to APR calculator. A calculator to enable business owners to consider loan offers and make informed decisions around their finances. For assistance and further information on all aspects of business finance, reach out to one of our expert brokers for a no-obligation discussion or a quote.
Interest rates are applied each year for the term of the loan but on the outstanding balance, and the balance reduces as the loan repayments are made. As factor rates are typically for short-term loans such as for 6 months, the interest is worked out on the full loan amount.
To clarify, for a business loan of $30,000 over 6 months with a 1.15 factor rate, the principal of $30,000 is multiplied by the 1.15 factor rate. The result is a total interest payable of $4,500 on t hat loan example. The business would repay $34,500 plus fees and charges, on the $30,000 borrowed.
A factor rate loan offers business owners no opportunity to save on the interest portion by reducing the loan amount over the term. The factor rate applies from the start of the term of the loan so even if early payments are made, the total interest, $4,500 in our example, would not reduce.
Contact us if you would like further clarification.
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THE INTEREST RATE IS CALCULATED ON A SECURED LOAN PREDOMINATELY FOR BUSINESS USE, EFFECTIVE 21/02/2026 AND SUBJECT TO CHANGE. WARNING: THE INTEREST RATE IS TRUE ONLY FOR THE EXAMPLES GIVEN AND MAY NOT INCLUDE ALL FEES AND CHARGES. DIFFERENT TERMS, FEES OR OTHER LOAN AMOUNTS MAY RESULT IN A DIFFERENT INTEREST RATE.
Our guides offer quick comparisons and simple explainers to help you move through the financing process with confidence.
A factor rate is expressed as a decimal and is the amount of the total loan that the borrower will need to finalise the loan amount requested.
Factor rates are quoted by some lenders on typically short-term, 6-12 month business loans.
The APR is the Annual Percentage Rate. This is shown as an annual percentage and includes the interest rate or factor rate, plus the relevant fees and charges and compounding effects
Lenders may quote and/or advertise an interest rate which does not include fees and charges. The APR does include lender fees and charges.
A factor rate does not include fees and does not represent an annual interest rate. Converting a factor rate to APR is considered more useful for comparing loans.
A factor rate is a decimal not a percentage. It is used to calculate the amount of interest charged on a loan. A factor rate is not an annual interest rate.
A factor rate will be quoted by a lender when a loan application is made.
An APR is the annual interest rate on a loan when all fees and charges are included. The factor rate does not include fees and charges and is not an annual rate. It is a flat rate or figure used to determine the full amount payable on a loan prior to fees and charges being included.
When quoted a factor rate, multiply the rate by the loan amount to arrive at the total amount to repay the loan, understanding that fees and charges will also apply.
Fees and charges vary with lenders, with applicants and with different loans. Fees and charges will be provided by the lender.
Jade Finance simple fast approval application process quickly delivers back all the information you need to help you make the right choices on your finance needs. We pride ourselves on delivering better loan interest rates. Simply you will find our loan packages hard to beat.
