Short-term business loans are paid off quickly, most often with daily or weekly payments.
Where you source the capital, will determine your cost. Make the Wise decision with Upwise.
Short-term loans also often come with factor rates instead of interest rates: a factor rate is a number that, when multiplied by your total loan amount, gives you how much you’ll be paying back.
A factor rate is a set cost of capital of the given term approved by the short term loan lender such as Upwise.
See the below example of a sample Upwise short term advance.
Short-Term Business Loans & Factor Rates
Some lenders will structure the contract as a purchase and sale of your future receivables..
Say you’ve taken out a $100K short-term business loan and the Upwise offer has a 1. 18 factor rate.
1.18 multiplied by $100K will determine the total amount you’ll need to pay back to maturity = $118K.
For this specific customer, underwriting approved this file for a 12 month term, which is a common approved term amongst small business owners searching for short term business loans.
Given that there are 21 payment days or business days in a month, since payments are taken Monday through Friday, never on weekends or holidays. That equals 252 payments per year on a daily payment program.
To calculate your payment, divide the number of payments (252) by the total payback to maturity $118k.
The amount of each of those business day payments would be $486.25.
Payments are broken down into micro daily or weekly payments. You’re paying a higher rate than a longer term loan for the quick and easy approval and funding process.