How lenders get to a number
A short-term lender does not start with the amount you want. It starts with the payment you can make.
- Find the payment your revenue can carry. Lenders count on a share of your monthly revenue. Call it 8% to 18%, depending on how established you are and how strong your credit is.
- Pick a term. Newer or weaker files get shorter terms, around 12 to 15 months. Established files with good credit get 24, and through our marketplace terms run to 36.
- Work backward. Payment × term is the total you can repay. Divide by the factor rate to get the amount you can borrow.
A worked example
A business brings in $50,000 a month. It has been open 5 years. The owner’s credit score is 700.
| Step | Math | Result |
|---|---|---|
| Payment the revenue can carry | $50,000 × 13% | $6,500 a month |
| Total repayable over 24 months | $6,500 × 24 | $156,000 |
| Amount that supports, at a 1.40 factor rate | $156,000 ÷ 1.40 | About $111,000 |
Change one input and the answer moves. Cut the term to 12 months and the same payment supports far less.
What your revenue supports
High-end estimates from our funding estimator. Real offers depend on your bank statements and existing debt.
| Monthly revenue | 1 to 3 years, credit under 680 | 4 to 6 years, credit 680 to 720 | 7+ years, credit above 720 |
|---|---|---|---|
| $25,000 | $20,000 | $55,000 | $75,000 |
| $50,000 | $40,000 | $111,000 | $150,000 |
| $100,000 | $80,000 | $222,000 | $300,000 |
| $250,000 | $200,000 | $557,000 | $750,000 |
Read across a row. Same revenue, very different numbers. Time in business and credit are worth as much as the revenue itself.
Why the term matters so much
The payment is fixed by your revenue. The term decides how many of those payments there are.
Take a business that can carry $9,000 a month:
| Term | Factor rate | Amount it supports |
|---|---|---|
| 12 months | 1.20 | $90,000 |
| 24 months | 1.40 | About $154,000 |
Twice the term does not mean twice the money, because longer terms cost more. It still means a lot more. Terms through our marketplace run to 36 months; the estimator stops at 24 to stay conservative.
This is also why weaker credit cuts so deep. It lowers the share of revenue a lender will count on, and it shortens the term.
What pulls the number down
An estimate only knows three things about you. An underwriter sees the rest.
- Payments to other lenders. These come straight off what you can carry.
- Low daily balances. If the account runs near zero, there is no room for a new payment.
- Overdrafts and returned payments. A few in three months can cut an offer or kill it.
- Lumpy deposits. One customer making up most of your revenue is a risk.
- Industry. Lenders treat some industries as riskier and size down.
What can push it higher
Short-term loans are not the only option, and other products are sized differently.
- Equipment financing is sized to the equipment. Kapitus finances up to 100% of the cost.
- SBA loans go up to $5 million over terms as long as 25 years, if you can qualify and wait.
- A line of credit runs up to $750,000 and only costs you on what you draw.
- Invoice factoring is sized to your receivables, from $200,000 to $7 million.
- A Business HELOC is sized to your home equity, up to $750,000, and does not look at the business’s revenue at all.
How much you should borrow
What you can borrow and what you should borrow are different questions. Three tests:
- The slow-month test. Can you make the payment in your worst month of the year, not your average one?
- The return test. If the financing costs $30,000, will the money earn more than $30,000?
- The use test. Borrow for the specific need. Extra money still has to be paid back at the same price.
Get your number
The funding estimator takes three inputs and no credit check. When you are ready for real offers, the short form takes about a minute.
How we got these figures
The estimates use the same rules as our funding estimator. The share of monthly revenue rises with time in business, from 12% at 1 to 3 years to 18% at 7 or more, and is reduced for credit under 720. Terms run 12 to 24 months. Factor rates are 1.20 up to 12 months, 1.28 up to 18 months, and 1.40 beyond that. No estimate exceeds three times monthly revenue. These are rules of thumb for short-term financing, not any lender’s underwriting policy.