Business finance glossary
APR (Annual Percentage Rate)
The true annualized cost of borrowing, including interest and fees — the standardized measure that lets you compare any two loans.
Annual Percentage Rate (APR) is the standardized cost of credit expressed as a yearly percentage, including both the interest rate and any fees that are part of the cost of the loan (origination fees, broker fees, points). By law (Regulation Z / TILA), lenders must disclose APR on most consumer loans. For business loans, APR disclosure is not federally required but is increasingly mandated by state commercial financing disclosure laws. APR makes loans comparable: a $50,000 loan at 8% interest with a $3,000 origination fee has a higher APR than the stated 8% rate because the fee effectively raises the cost of the borrowed capital. For merchant cash advances and short-term loans, converting to APR often reveals effective annual costs of 50–150%+ that would be obscured by a factor rate.