How to Compare Funding Offers With a Merchant

Leg 01Put every offer in the same format first

Funders present offers differently. One quotes a factor rate and a daily payment, another quotes total payback and a weekly payment, a third lists fees separately on a second page. Before you talk to the merchant, translate every offer into the same set of fields so you are comparing like with like.

FundPilot's offer comparison lays approved offers for a deal side by side in one view, which saves rebuilding the table by hand each time. Whatever tool you use, check every figure against the funder's actual offer document before you present it.

• Funding amount approved
• Fees deducted at funding, and the resulting net amount the merchant receives
• Factor rate or other cost figure as stated by the funder
• Total payback amount
• Payment amount and frequency (daily, weekly or other)
• Estimated term, with a note on how it is calculated
• Key contract terms, such as early payoff provisions and any reconciliation process

Leg 02A worked example with two hypothetical offers

Say a merchant is approved by two funders for $40,000. These figures are purely illustrative, not typical terms from any funder.

Offer A has a factor rate of 1.32, so total payback is $40,000 times 1.32, or $52,800. A $800 fee is deducted at funding, so the merchant receives $39,200. Payments are daily on business days at an estimated $419, which works out to roughly six months if sales hold steady.

Offer B has a factor rate of 1.28, so total payback is $51,200. The fee is $2,000, so the merchant receives $38,000. Payments are weekly at an estimated $1,313, which works out to roughly nine months.

Offer B has the lower factor rate, so at a glance it looks cheaper. Now compare total cost: what the merchant pays back minus what they actually receive. Offer A costs $52,800 minus $39,200, or $13,600. Offer B costs $51,200 minus $38,000, or $13,200. Offer B is still a little cheaper in dollars, but the gap is far smaller than the factor rates suggested, and the merchant pays that cost over a longer period with a much larger single payment each week.

The factor rate is one number. Total payback minus the cash the merchant actually receives is the number they live with.

Leg 03Explain frequency and term in terms of their bank account

Payment frequency often matters more to a merchant than a small difference in total cost. A daily debit of $419 is easy to absorb for a business with steady card sales every day. A weekly debit of $1,313 may suit a business whose revenue arrives in larger, less frequent deposits. Neither is better in the abstract.

Use their own statements. Look at the daily balance pattern and ask: on the lowest-balance days of the last three months, would this payment have cleared? If the honest answer is no, the offer may be wrong for them regardless of price.

Be careful with the word term. For a merchant cash advance, which is generally structured as a purchase of future receivables rather than a loan, the time to pay back depends on how the agreement ties payments to sales. Present the term as an estimate, explain what it assumes, and point the merchant to the contract language on adjustments.

Leg 04Walk through fees and contract terms out loud

Fees are where merchants are most often surprised. Origination or underwriting fees, fees for specific payment methods and any charges for missed or returned payments should all be named, with the dollar amount where you know it. If a fee is deducted at funding, say clearly how much will actually land in their account.

Then cover the contract provisions that change the economics: what happens if they want to pay early, whether there is any discount for doing so, how a reconciliation request works if sales drop, and what the agreement says about taking on other funding while it is outstanding. You are not their lawyer and should not interpret the contract for them, but you can show them where those sections are and encourage them to read them or have their own adviser review them.

1. Read each offer document yourself before the call.
2. Present the side-by-side table, starting with net funded amount.
3. Explain total payback and total cost for each offer in dollars.
4. Test payment amounts against their actual daily or weekly balances.
5. Point out fees, early payoff terms and reconciliation provisions in each contract.
6. Ask which factors matter most to them, then answer their questions.
7. Let them choose, and note on the deal record which offer they chose and why.

Leg 05Where state disclosures come in

Some states have commercial financing disclosure laws that require certain cost information to be provided to the business before it signs, and the required format and timing differ by jurisdiction. Requirements change, so confirm current obligations with qualified counsel rather than relying on a summary. This is general information, not legal advice.

Even where no disclosure is required, giving the merchant clear cost figures is simply good practice. Treat any required disclosure as a floor for transparency, not a ceiling.

Leg 06Keep a record of the conversation

Note which offers were presented, what was explained and what the merchant chose. If the call was recorded with appropriate consent, the transcript and summary in FundPilot sit on the deal alongside the offers, which helps if questions come up later and makes renewal conversations much easier.

That record also protects your brokers. When a merchant later says they did not understand the payment frequency, a clear note showing it was explained, with the numbers, resolves the question quickly and fairly.