As an online seller, you’ll see lots of financing options out there - from traditional business loans to complex cash advances. The different fees and repayment terms make it hard to compare apples to apples.
Working with DTC brands, we've seen over 10,000 different loan offers for ecommerce businesses like yours - from traditional business loans to complex cash advances. The different types of financing arrangements often use different terms resulting in a lot of confusion for brands looking to truly understand the cost of the loan, and choosing the most efficient option for their needs.
We built this ecommerce loan calculator to help you compare the different terms of your loan options and to translate everything into an annual percentage rate (APR). This way, you have clear numbers to make smart financial decisions.
Here's Why You Need the Annual Percentage Rate (APR)
No matter how long you’re borrowing money for or the exact repayment schedule, you need one ruler to compare your costs. The APR is that ruler. It tells you the total cost of borrowing for the year as a percentage of the amount that you’re borrowing.
For cash advances, we convert the factor rate into an estimated APR based on your monthly sales. While with term loans, we use the interest fees, repayment method, and frequency of repayments to estimate the APR.
How to Calculate Your APR
Use Finaloop's free ecommerce loan calculator to easily compare any business financing option and choose the one that best fits your needs.
Add your lender and funding type, and we’ll pop up the right calculator for you.
How do I choose the most cost-effective ecommerce business loan?
The key to finding out the true cost of any loan is to calculate the annual percentage rate (APR) of each one and compare them with one universal number.
The APR simply reflects the total cost of borrowing as a percentage rate of the amount that you’re borrowing, annually. It takes into account the interest, time, repayment terms, and any additional fees.
By comparing apples to apples with the APR, you can save money for your business.
The key to finding out the true cost of any loan is to calculate the annual percentage rate (APR) of each one and compare them with one universal number.
The APR simply reflects the total cost of borrowing as a percentage rate of the amount that you’re borrowing, annually. It takes into account the interest, time, repayment terms, and any additional fees.
By comparing apples to apples with the APR, you can save money for your business.
How do I calculate the Annual Percentage Rate (APR) of an ecommerce loan?
APRs for ecommerce loans are tricky because many ecommerce financing options actually aren’t traditional term loans, but cash advances (or merchant cash advances).
This matters because cash advances don’t have the same legal obligation to disclose the APR. Instead, they charge a fixed amount of fees that are based on your future sales or deposits in online accounts. Those deposits could be in your Paypal, Shopify, or Stripe accounts.
Can the APR of my ecommerce financing change?
Since you repay cash advances based on your business’s future sales or deposits, the term of the financing and the frequency of the repayments can change based on your sales and deposits.
This makes it difficult to calculate the exact APR for cash advances before you fully repay the amount that you borrowed. Still, in order to compare this form of business financing with traditional loans, it’s helpful to estimate the APR.
How do I calculate the cost of cash advances?
Usually, cash advances talk about their cost in terms of their factor rates. Factor rates are a simple ratio between the amount of cash that you’re borrowing and the total fees that you’re charged.
The factor rate will depend on your industry, time since your business’s establishment, credit history, and most importantly your sales history.
How should I use the ecommerce loan calculator results?
The Finaloop ecommerce loan calculator and the information on this page are prepared based on our current understanding of the relevant financial products. The results provide estimates only and do not take into account your individual objectives and financial situation. These results should not be considered advice. You should seek professional financial advice tailored to your personal circumstances before making any decisions.
That’s what we’re here for.
Accurate ecommerce books, done for you.
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