[patio11]

How am I able to compare this "interest free" loan with a small business line of credit from the bank?

If you're able to get a small business line of credit from your bank, take that, it will invariably be superior. Sadly, that product has virtually disappeared from the marketplace for small businesses with revenue less than ~$1 million. The underwriting costs are too high, the product is too risky, and the revenue potential is too low. The bank will, instead, steer you towards credit cards. Credit cards are a wonderful product but they don't substitute for the need.

There exist a bunch of alternative lenders who are eating this space up with pricey-products-which-actually-get-issued. OnDeck gives fairly uncomplicated lines of credit, for example. Their stock offer is 36%. (I have one, and occasionally use it.) Kabbage (love the name) does a merchant cash advance with implied APRs which are even higher. There are more costly options still, including traditional hard-money lenders and merchant cash advance providers.

This offering is closest in character to Paypal Working Capital.

[pbarnes_1]

SBA loans are not that onerous -- go to a credit union (https://www.sffirecu.org/business/loans/small-business-admin...) instead of a big bank and you can get it done.

A Chase (or whatever) business card at 13% is still better than this since you can pay it back early.

[kennywinker]

Sample size of one, but I have friends who run a small shop doing trade work (earning far less than 1m/year) and they were able to fairly easily get access to 10-20k of loans with interest rates in the <10% ball park (don't know exact numbers, also not mine to share). So to hear that kind of loan has "virtually disappeared" is surprising.

[pbreit]

Frequently those 10% loans are for, say, 6 month payback periods so the effective APR is over 20%.

[fludlight]

Also, the typical borrowers tend to have at most a rudimentary knowledge of finance so they don't understand the terms of the loan. Sometimes they don't even bother reading the loan agreement. This makes anecdotal evidence extra unreliable.

[HappyTypist]

Generally interest is annualised and measured in APR.

[pbreit]

Actually, on these types of loans, generally not.

For example: https://squareup.com/capital

I don't really get how they arrive at their numbers but on first glance it looks insane. On the $10k loan with the $1,300 fee. If you had daily sales of $1,000 you'd pay the loan off in 100 days making the APR somewhere around 50%.

They are frequently fee-based, not rate based. And are frequently less than a year with the rate being highlighted, not the APR.