Business finance offer checker

The offer checker takes any business finance offer, whether it's quoted as a factor rate, a monthly rate, a flat fee or "pence in the pound", and turns it into one comparable number: the APR on the money you actually receive. It also flags the features that make an offer riskier than its price suggests.

Why check an offer at all

Business finance for limited companies is not regulated by the Financial Conduct Authority, and merchant cash advances are not loans and are not FCA-regulated. The FCA's financial promotion rules in CONC 3 don't apply to a promotion that clearly indicates it is solely promoting credit for the purposes of a customer's business. So business offers don't have to carry a representative APR, and many don't. Two offers for the same amount can look similar and cost very different amounts per year.

How to use it

1. Amount offered. The headline figure.
2. Up-front fees. Anything deducted from the amount or paid at the start: arrangement, admin, origination, broker or "processing" fees.
3. Total repayment. Every pound you'll pay back.
4. Term in months and payment frequency (daily business days, weekly or monthly).
5. Existing advances or loans already running.
6. Early payoff discount. Does paying early reduce the total? Yes, no or unsure.

The method, exactly

• Amount received = amount offered − up-front fees.
• Cost = total repayment − amount received. Cost per £1 = cost ÷ amount received.
• Factor rate = total repayment ÷ amount offered.
• Payments: daily = 21 a month (252 a year), weekly = 52 a year, monthly = 12. Each payment = total ÷ number of payments.
• APR = the nominal annual rate on the amount received: the periodic rate at which those payments are worth exactly what you received, times the number of periods in a year.
• Verdict: Sterling's rule of thumb, not market data. Under 20% APR "priced like bank lending"; 20–50% "in line with many online term loans"; 50–100% "expensive short-term money"; over 100% "very expensive".

Flags appear when:

• up-front fees are more than 5% of the amount offered;
• payments are daily, since they come out on quiet days too;
• the term is 6 months or less and the total is 1.3 times the amount offered or more;
• you already have 2 or more advances or loans running;
• you haven't confirmed that paying early reduces the total.

Worked example

An offer of £50,000 with a £2,500 fee taken off the top, £67,500 to repay over 6 months by daily debit, one other advance running, early settlement unclear:

• Amount received: £47,500
• Cost: £20,000, about 42p per £1 received
• Factor rate: 1.35
• 126 payments of £535.71
• APR: about 149%
• Verdict: very expensive
• Flags: daily payments, short term with a high payback, early settlement unconfirmed

Without the fee, the same offer is about 126% APR. The £2,500 fee alone adds over 20 percentage points, because you pay the full total on less money. A fee of exactly 5% doesn't trigger the fee flag; it would at £2,501.

Limitations

• It assumes level payments. Holdback advances vary with your takings, so enter your best estimate of the term and try a faster and a slower one.
• It only knows the fees you tell it about. Ask for every charge in writing.
• The verdict bands are a rule of thumb for orientation, not a benchmark for your sector or a statement of what you should be offered.
• It's a comparison tool, not advice or an offer.

Sterling's take: if the provider won't give you the total repayable and the term in writing, you don't need the checker to know the answer. See our funding scams guide for the other warning signs.