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BUSINESS FINANCING GLOSSARY

Interest Rate

The percentage charged on the outstanding principal of a loan, separate from fees. Combine it with fees to get the true cost — the APR.

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Related terms

Annual Percentage Rate (APR)→The yearly cost of borrowing expressed as a percentage, including interest and most fees. APR is the only fair way to compare offers priced differently.Prime Rate→The benchmark rate banks charge their most creditworthy customers (the WSJ Prime). Many business loan rates are quoted as “Prime + a margin.”Factor Rate→A pricing multiple (e.g. 1.25×) used for MCAs and some revenue-based financing instead of an interest rate. You repay the advance times the factor — convert it to APR to compare honestly.

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