How to Read a Business Funding Offer Before You Sign

The offer sheet matters more than the pitch

By the time an offer lands in your inbox, you have probably talked to a salesperson, heard the highlights, and started picturing what the money does for your business. That is exactly the moment to slow down. The phone call is marketing. The offer sheet is the deal. Whatever was said out loud, only the numbers on the page bind anyone to anything.

The good news is that a funding offer is short — usually one or two pages — and it is built from the same handful of components every time. Once you know what each line means and how the lines interact, you can evaluate any offer from any funder in about ten minutes. This guide walks through each line in the order it usually appears.

The five numbers that define every offer

Strip away the formatting and every revenue-based funding offer comes down to five figures. The advance amount is the cash that actually hits your account. The factor rate is the multiplier that sets your payback. The total payback is the advance times the factor rate. The term is how long repayment is expected to run. The remittance is what leaves your account each day or week.

Find all five before you read anything else. If any one of them is missing from the document, that is not an oversight — it is your first red flag, and we will come back to it. A complete offer states all five plainly, because the funder did the math before sending it and has no reason to hide it.

Write the five numbers on a sticky note. Seriously. When you compare offers from multiple funders — and you should — having advance, factor, payback, term, and remittance side by side keeps a slick layout or a friendly rep from tilting your judgment.

• Advance amount — the cash deposited to you
• Factor rate — the payback multiplier (e.g., 1.10 to 1.49)
• Total payback — advance × factor rate
• Term — the expected repayment window
• Remittance — the daily or weekly payment, or the holdback percentage

Factor rates are not interest rates

This is the single most misunderstood line on the sheet. A factor rate of 1.25 does not mean 25% annual interest. It means you repay 1.25 times what you received, regardless of how fast you repay. On a $100,000 advance at a 1.25 factor, the payback is $125,000. The cost of the money is $25,000 — fixed on day one.

Because the cost is fixed, the speed of repayment changes the effective annualized cost dramatically. Pay that $125,000 back over 12 months and the money cost you 25 cents per dollar across a year. Pay it back over 6 months and you paid the same $25,000 in half the time — a much higher annualized figure, even though the dollar cost never moved.

So convert every offer to total dollar cost first: payback minus advance, plus all fees. Then ask whether the thing you are funding — inventory, a contract, equipment, payroll for a ramp-up — will generate more than that dollar figure inside the term. That question, not the rate, is what decides whether an offer makes sense.

Holdback and remittance: how repayment actually works

A traditional merchant cash advance is repaid through a holdback — a fixed percentage of your daily card sales. If your holdback is 15% and you process $4,000 in cards today, $600 goes to the funder today. On a $2,000 day, $300 goes. The payment flexes with revenue, which is why MCAs suit businesses with strong but uneven sales.

Many modern advances instead use a fixed ACH remittance: a set dollar amount debited daily or weekly. Take total payback of $125,000 over an estimated 10-month term with daily debits, and you are looking at roughly $595 every business day. Fixed remittance is predictable, but it does not shrink in a slow week — make sure your slowest realistic month can absorb it.

Check which structure your offer uses, because the document language differs. A percentage holdback should state the exact percentage. A fixed remittance should state the exact dollar amount and frequency. If the sheet says something vague like "payments based on receivables," ask for the precise mechanics in writing before going further.

The fee section changes the math

Fees live below the headline numbers, and they matter because they reduce what you actually receive without reducing what you repay. An origination fee of 3% on a $100,000 advance means $97,000 hits your account — but you still repay the full $125,000. Your true cost just went from $25,000 to $28,000. Recompute your total dollar cost after every fee.

Common line items include origination or underwriting fees, ACH or wire fees, and occasionally a monthly administration charge. None of these are inherently abusive — funders have real underwriting costs — but every one of them should be disclosed on the sheet, in dollars or an exact percentage, before you sign. "Standard fees apply" is not disclosure.

Also look for the opposite of a fee: a prepayment discount. Some funders reduce the total payback if you repay early — for example, dropping a 1.25 factor toward 1.15 if you clear the balance in the first 90 days. If you expect a strong season ahead, a written early-payoff schedule can be worth real money. If it is not in writing, it does not exist.

Red flags that should stop you cold

Most funders are running an honest business. The bad actors, though, leave fingerprints on the offer sheet itself, and they are not subtle once you know what to look for. None of the items below are negotiating points. Each one, on its own, is a reason to decline the offer and find another funder.

The worst of these is the confession of judgment — a clause where you waive your right to defend yourself in court before any dispute exists. If you sign one and the funder claims a default, they can obtain a judgment against you without a hearing. Several states have restricted them precisely because they were abused. Do not sign one.

• A confession of judgment (COJ) anywhere in the paperwork
• Blank fields you are asked to sign over — amounts or terms "to be filled in later"
• Pressure to sign today because the offer "expires at 5 p.m."
• Fees that appear at closing that were not on the offer sheet
• A rep who encourages you to take a second advance on top of an existing one (stacking)
• No physical address, no named underwriter, or a contract entity different from the company you spoke with

The questions a legitimate funder will happily answer

The fastest way to separate a professional funder from a boiler room is to ask direct questions and watch what happens. A real underwriting shop answers all of these in plain English, in writing, without irritation — because the answers are already in their own paperwork. Evasion, topic-changing, or "don't worry about that" is itself your answer.

At Broadway Advance we have placed over $120 million across 65 industries since 2014, working with more than 25 partner funders, and we put every one of these answers on the offer itself. Any funder who has been doing this seriously for years can do the same. Hold every offer — including ours — to that standard.

• What is my total payback in dollars, including every fee?
• Is the remittance a fixed debit or a percentage of sales, and exactly how much?
• What happens to my payment if my revenue drops — is there a reconciliation provision?
• Is there a prepayment discount, and what is the exact schedule?
• Is there a confession of judgment or personal guarantee in the agreement?
• Can I see the full contract — not just the offer summary — before I sign?

Before you sign: a two-minute checklist

Pull out the sticky note. You should now be able to fill in: cash received after fees, total dollars repaid, the payment amount and frequency, the term, and the early-payoff terms if any. If you cannot fill in every blank from the documents in front of you, you are not ready to sign — not because the deal is necessarily bad, but because you do not yet know what it is.

Then ask the only strategic question that matters: will the money make you more than it costs, inside the repayment window? A $25,000 cost against inventory that returns $80,000 in season is an easy yes. The same $25,000 to patch a hole with no plan behind it is how businesses end up stacking advances. Good funding decisions are made on paper, before the wire hits.

Frequently asked questions