Do You Pay Interest on the Revenued Business Card?


When a business uses a traditional bank loan, line of credit, or a credit card to gain working capital, the cost to use the funds is expressed as interest that is calculated according to an annual interest rate. 

With the Revenued Business Card, however, you are not paying interest on the money that you use. Instead, you pay back a fixed amount based on another metric known as the factor rate.

Factor rates are not as common as interest rates in the banking world, but they are more frequently used for alternative financing products like short-term loans and cash advances. Factor rates are simpler to calculate, and they allow you to know upfront how much the money you are using is going to cost you.

In order to understand what a factor rate is and how it works with the Revenued Business Card, let’s first take a closer look at interest and how factor rates differ from interest rates.

What Is Interest?

Interest is the most common metric for using other people’s money. Even before you started your business, you were probably familiar with interest and interest rates as they applied to your car loan, mortgage, or personal credit cards.

Interest is expressed as a percentage, and it is calculated over a specified time period, usually a year. For example, if you borrow $1,000 at a 10% interest rate for one year, you would have to pay back $1,100. The loan would have cost you $100 in interest ($1,000 x 0.1) for one year, and the longer it takes you to pay the funds back, the more they will cost you. 

Although it is calculated annually, interest is actually added daily to the balance that you owe. Additionally, interest charges are often compounded, which means that you are not just paying interest on the principal that you borrowed — the lender will also charge interest for any outstanding interest you haven’t paid back yet.

The snowball effect of compound interest can make your repayment costs add up over time. For example a 19.99% APR over 5 years can end up costing 250% of the original loan amount. With such complicated calculations, it can be difficult to know how much your funds are actually going to cost you in the end.

Factor Rate Versus Interest Rate

A factor rate is different. It is usually expressed as a decimal rather than a percentage, and it is a fixed ratio that does not depend on the passage of time. If you get $1,000 in funds at a factor rate of 1.1, the  amount of future revenue you sold  will be $1,100. The use of the initial $1,000 will cost you $100 ($1,000 x 1.1) no matter how long it takes for the revenue to come in. .

When a financing company gives you financing with a factor rate, you will know exactly how much the money costs you. This allows you to make smart business decisions knowing that this anticipated cost is stable and will not change over the course of the term. Factor rates do not continue to accrue interest over many years. 

Factor rates and interest rates vary in the criteria used to determine your rate. A borrower’s specific interest rate may be decided by:

  • The length of the loan term — Generally speaking, the longer the term the higher the interest rate.
  • Business credit score — Many lenders consider a business’ FICO score when deciding how much interest to charge.
  • Personal credit history — Interest rates could be higher for those with excessive debt or a history of late payments.

Factor rates are usually in the range between 1.1 and 1.5. What you qualify for generally depends on the following criteria:

  • Business history — Although years of history are usually not necessary (Revenued only requires six months), lower factor rates are sometimes offered to companies that have been operating longer.
  • Revenue consistency — The more month-to-month consistency your business can show on its balance sheet, the lower the factor rates tend to be.
  • Revenue levels — Even if your credit scores are low, you can qualify for low factor rates based solely on the amount of sales you do each month.

How Does Factor Rate Work with the Revenued Business Card?

When applying for the Revenued Business Card, we will look at your business’s bank account activity and estimated revenue to determine whether you qualify and what your spending limit and factor rate will be. 

Upon approval, we will notify you of the factor rate we can offer your business. Because of this transparency and upfront pricing, you can knowledgeably establish whether the Revenued Card is the best financing product for your company.

Most cash advance companies that use products with factor rates will charge you for the full amount of your advance, whether or not you use their funds. The cash is deposited into your account, and the factor rate is applied to the full amount. The Revenued Business Card works differently.

Pay for Only What You Use

With the Revenued Business Card, you are approved for a specific spending limit; however, your factor rate is not automatically applied to this entire amount. If you use your card for a single $1,000 purchase but the rest of your limit remains untouched, you only pay for the $1,000 that you used. Your cost will be $1,000 multiplied by the factor rate. 

The factor rate is agreed upon at the beginning of your contract and will not change as time goes on for any individual expenditure. Each time you make a purchase, it is subject to this agreed-upon rate. 

Choose Revenued for Predictable Costs and Transparency

You do not pay interest on the Revenued Business Card. Instead, the finance costs will be calculated using a factor rate determined by your monthly sales history and estimated future revenue.

Your business can use the Revenued Card to purchase inventory, pay employees, or cover other operating costs while waiting for your next influx of revenue. Use the Revenued Business Card with confidence knowing that the factor rate will be consistent and there are no hidden costs. 

For more information about factor rates and the Revenued Business Card, contact us today. You can reach an advisor by calling us at (855) 943-5363 or fill out our online form.


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