How We Calculate Cents on the Dollar
When researching lending rates in the business loan industry, we quickly realized that there is no standard way that lenders show borrowing fees. To compare loan rates as accurately as possible, TBC displays the cents on the dollar business owners will pay for a 12-month, $100k loan.
The following text gives information on how rates were determined:
For lenders that do not display rates:
Banks are the number one perpetrator of undisclosed rates. Big banks such as Wells Fargo, PNC, and Bank of America were all missing key pieces of information such as minimum requirements for borrowing, wait time to funding, and, most important to small business owners, interest rates. Even though third party sources typically site banks as having lower interest rates than most online lenders, no bank displayed this information online.
However, banks were not the only ones guilty of hiding rates. We found several online lenders who would not disclose rates until you filled out a contact form. Our hunch is that these lenders have high interest rates.
*For these companies, we were unable to calculate cents on the dollar you would pay.
For lenders that give scenarios and general numbers:
Other online lenders give you a scenario of what you *could pay. They either do this by (1) giving you a possible interest rate when you borrow a set amount of money, or (2) giving you a giant range that your interest rate could fall under, such as 5-40% (only a slight exaggeration). Overall, you only get a general idea of what your interest rate will be with these companies because there are too many factors that will change the interest rate. Factors that will change your interest rate include the amount you borrow, term length, credit score, the business you are in, and more.
*When calculating cents on the dollar for these companies, we used the highest interest rates we could find to prepare users for the worst case scenario. Interest rates were also calculated based on a $100k loan over 12 months.
For lenders that provide calculators:
In our opinion, the most transparent lenders are the ones who let you calculate your interest rate based on the amount you want to borrow and the term you borrow for. Companies with these types of calculators online include CAN Capital, Credibly, Funding Circle, and Kabbage.
*Interest rates were determined based on a $100k loan over 12 months.
To compare interest rates on TBC, we calculated the cents on the dollar you would pay based on the information we could find. For companies that provided interest rates, we used the highest interest rate we could find to calculate how much you would actually be spending for a $100k loan over 12 months. For companies that provided calculators, we used that to calculate the cost of the same loan ($100k over 12 months).
Keep in mind that even interest rates given with calculators are not 100% accurate. The following factors may also influence your interest rate:
- Type of industry you are in
- Credit history
- Credit score
- Annual revenue
- Cash flow
- And more
Here are the actual calculations: