Business term loans: how they are actually priced

The same product, quoted two ways.

Banks and marketplace lenders quote an APR, or a nominal rate plus fees. Many short-term online products branded as term loans do something different: they quote a factor or a total payback, and disclose an APR only when a disclosure law forces it. An APR and a factor are not the same measure, so an offer sheet in one convention cannot be compared to an offer in the other until both are expressed as an all-in APR. State disclosure laws in California and New York now require that all-in APR, inclusive of every finance charge, on closed-end commercial loans, which is the number to insist on.

How to convert a factor before you compare.

If your offer is quoted as a factor, convert it before you compare it to anything else. Take a 1.27 factor on a 12 to 15 month term, close to what one large online lender actually books. It means you repay 1.27 times what you borrow, so $50,000 comes back as about $63,500. That looks like a 27 percent cost, but because you pay the balance down over the months instead of holding all of it the whole time, the all-in APR lands in the mid-40s to mid-50s, not 27 percent. The shorter the term, the higher the APR the same factor produces. So when an offer is quoted as a factor, ask the lender for the all-in APR in writing, then enter that APR in the cost estimator to see it on the same footing as an APR-quoted offer.

Three price worlds under one name.

Lender channel, not credit score, is the dominant price axis. The same borrower can be priced in single digits at a bank and in the mid-40s online. These three price ranges never blend into one number.

The floor is not the sold price.

The cleanest example in the public record is OnDeck. It advertises a term-loan floor of 27.30 percent, while its own published disclosure puts the average APR on term loans it originated in the first half of 2025 at 56.4 percent. A borrower who reads “from 27 percent” and lands near the average pays roughly twice the floor. This is the rule, not a single outlier: an advertised starting number is priced for the strongest applicant, and most applicants do not match that profile.

Where you borrow outweighs your credit.

When a batch of these online loans was bundled and sold to investors, the borrowers in it averaged a 723 credit score, which is prime credit. Those prime borrowers still paid about 44.4 percent a year, because the loans were short-term-online paper. Credit tier moves your price inside a channel, but it does not move you between channels. Which door you walk through sets the range before your score adjusts it.

Sixty percent were surprised.

In the Federal Reserve small-business survey, 60 percent of businesses that borrowed from online lenders reported that the actual cost was higher than they expected, more than any other lender type. That gap between what borrowers expected and what they paid is the advertised-floor problem showing up in the numbers: borrowers remember the floor they were quoted, then pay the higher realized APR.

A fee taken off the top raises the real cost.

An origination fee, commonly 1 to 5 percent in the online and marketplace channels, is usually deducted from your proceeds. You receive the face amount minus the fee, but you repay against the full face amount, so the true all-in APR is higher than the quoted rate. The shorter the term, the more that same fee costs in APR terms, because it is amortized over fewer months. To compare honestly, spread the fee over the actual term and read the all-in APR, not the headline.

Every figure on this page is general US market data as of Jul 2026, not OpenQuote pricing and not an offer. It is here so you can sanity-check a quote against typical ranges. Any real offer, and the partner paperwork behind it, governs. This page is education, not legal or financial advice.