How is business loan interest calculated?
Business loan interest is calculated one of three ways: amortizing interest (you pay interest on the declining balance, like a mortgage), simple interest (a flat charge on the original amount), or a factor rate (a fixed multiplier with no interest at all). Two offers can advertise similar-sounding numbers and differ enormously in true cost. Misreading the math is how borrowers end up paying double what they expected, and it's exactly why Quordx Capital discloses total repayment cost on every match, not just a headline rate.
Part of our guide to Business Loans.
Last updated · Reviewed by Cody Dreis
50+ Lenders|Funding in as little as 24 hours
The three calculation methods, decoded
Amortizing interest: used by banks, SBA lenders, and most term lenders. Each fixed payment splits between interest (charged on the remaining balance) and principal. Early payments are interest-heavy; later ones mostly principal. Example: $100K at 7.2% over 5 years runs about $1,990/month, roughly $19,400 in lifetime interest. Pay early and you skip future interest. Simple interest: some short-term lenders charge a flat percentage of the original principal, so the cost doesn't shrink as you repay. A "10% rate" on a 6-month simple-interest loan is a far higher APR than 10%. Factor rates: merchant cash advances multiply the advance by a factor; the factor rate is set per deal, so ask for the total payback in dollars and the APR. A $50K advance at 1.30 means $65K repaid, period: early repayment saves nothing. The universal translator is APR, which folds in fees and timing so different structures become comparable.
Products by calculation type
Business term loans and SBA loans: Amortizing; the structure that rewards early payoff. Best for most borrowing needs.
Business lines of credit: Interest accrues only on drawn funds for the days outstanding. Best for short, recurring needs.
Merchant cash advances: Factor-rate pricing; fast, but the fixed cost makes it expensive. A tool for specific situations, never the default.
Run the numbers on your loan
Pick a product, set the amount and term, and see a typical payment.
How Quordx Capital Works
One application, roughly 10 minutes, and one document upload put Quordx Capital's matching process to work matching you against 50+ vetted lenders. You get 3-7 ranked matches with the pricing method, total repayment, and every fee laid out plainly. Most lenders respond within 24-48 hours; funding typically arrives in 3-7 business days.
What to Expect
No decoding required: each offer shows what you'd repay in dollars, not just a rate that hides the structure. If a factor-rate product is among your matches, its true cost gets stated bluntly alongside cheaper alternatives. Looking is free, no fees touch you ever, and nothing obligates you to accept.
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Written by
Cody Dreis
Founder, Quordx Capital
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Quordx Capital is a business funding broker, not a lender. Lenders make every credit decision and set the rate, fees and terms, and not every business qualifies. Quordx may be paid by a lender when a deal funds. Full disclosures