Hidden Costs in Financing: What Business Owners Need to Know Before They Sign
When you’re searching for business financing, the first thing most owners look at is the funding amount and the payment. But the real question is: what will this financing cost me over its full term?
Too often, small business owners sign contracts that look simple upfront, only to discover later that the “fine print” holds the true cost.
Common Hidden Costs You Might Overlook
Origination and Processing Fees
Some lenders take a percentage right off the top, which means you’re borrowing more than you actually receive.Factor Rates vs. APR
Merchant Cash Advances often advertise a factor rate, but that doesn’t equal an APR. The true cost can be much higher once converted.Early Payment Penalties
Paying off your balance ahead of schedule should save you money but some contracts won’t give you that benefit.Daily or Weekly Payments
Daily and weekly remittances can strain cash flow, especially for seasonal businesses.Late or Default Fees
If revenue drops or payments get delayed, fees can add up quickly and make repayment harder.
Real-World Example
Offer A: $50,000 advance, factor 1.35, daily repayment over 6 months → Total payback = $67,500.
Offer B: $50,000 term loan, 12% APR, 24 months → Total payback = ~$56,700.
At first glance, Offer A gets you the money fast. But it’s nearly $11,000 more expensive in the long run.
Questions to Ask Before You Sign
Are there any fees deducted before funding?
Do I get a discount for early repayment?
How frequently will payments be taken?
What happens if revenue drops for a month?
Will the lender file a UCC lien or take collateral?
How BizFin Protects You
At BizFin, we believe business owners deserve transparency. We’ll walk you through your total cost upfront and compare offers side-by-side, so you can make the smartest choice for your cash flow.
👉 Ready to see what your financing really costs?
✅ Get Pre-Qualified in 60 sections
✅ Apply for Financing today and find out what you can access without hidden surprises