New York Financing Disclosure FAQ

This FAQ applies only to customers in New York.

What is an APR?

  • APR stands for Annual Percentage Rate. Annual percentage rates are different from interest rates. Most loans have costs associated with them, such as fixed fees, or interest calculated by applying a rate to an outstanding balance (Toast Capital Loans have a fixed fee, but do not accrue any interest). Borrowers will repay the amount that they received as well as the extra costs. An APR is a tool that is intended to help customers get an idea of how much of their payments will go toward those costs on an annual basis. These amounts are only estimates. In fact, the loan’s actual APR can change from day to day based on the amount of your regular payments and how long you take to repay.   

  • Regarding your Toast Capital Loan, the only fee you will pay that is factored into the APR is a fixed loan fee. This will be captured in the APR that you see in your Offer Summary.

  • The APR can be used to help you evaluate different financing options, but, unlike an interest rate, it is not a contractual term and does not change the amount that you will repay. You will repay the amount that you receive and the fixed fee. Toast Capital Loans do not have any associated interest, including compounding interest. 

How can I use the APR?

  • APRs can be used to roughly compare different financing offers, but there are factors beyond the APR that don’t quite make  the APR by itself the only data point to be considered in shopping for financing. 

  • Since the APR is an estimate, you may end up paying more or less than what the APR estimates. 

    • Fixed fee example: if your loan has a fixed fee, the percentage of your loan principal (the amount that you receive in your bank account) that is made up of costs may be more or less than the APR estimates if you pay the loan off in a different time period than the APR estimates. 

      • For example, the APR on a 270-day Toast Capital Loan assumes that you repay in 270 days. The APR may be higher if you repay the loan sooner, or lower if you take longer, but it does not change the total amount that you pay.

    • Variable interest example: since the interest rate varies, it’s possible you could pay more or less than estimated over time

    • Fees example: if there are unexpected fees, such as late fees or rejected ACH fees, you will end up paying more than estimated because they are not included in the APR estimation

  • While APR can be helpful, the best way to tell which product is right for you is by comparing all of the actual loan details, including the repayment period, whether the loan accrues interest, and, if so, whether interest rate is fixed or variable, and any fees.

How does an APR differ from an interest rate?

  • Note:  although this discussion of the APR sometimes references "interest" by way of explanation, please keep in mind that Toast Capital Loans do not involve interest calculated by applying a rate to a balance, and instead only a fixed loan fee.

  • An APR isn’t the same as an interest rate (see above for “What is an APR”). Most importantly, unlike an interest rate, the APR is not a contractual term and does not change how much you will repay. APRs do include estimated interest payments, but also include most other fees (application fees, origination fees, etc.) and incorporate your estimated repayment schedule to arrive at the annual percentage rate. Sometimes the interest rate and APR will be the same, for example if your interest rate is fixed, you have no other fees, and you have a one-year repayment term. 

    • Toast Capital Loans do not charge interest, but do charge a fixed fee - the fixed fee is the only fee considered in the APR for your Toast Capital Loan. 

  • An APR is always expressed as an annual percentage, whereas an interest rate may be expressed as a different periodic rate based on how frequently it accrues (generally daily, but sometimes monthly, etc.).

  • It’s also important to know that some interest rate-based loans may have what’s called “capitalized interest,” where unpaid interest gets added to your principal, and interest then accrues on the interest included in the new principal amount. This generally results in a higher-than-expected total repayment amount and a higher APR when all is said and done.

Why is my APR higher than other offers?

  • When comparing a Toast Capital Loan APR to other loan offerings, your APR may be higher when the alternatives have longer estimated repayment periods used in the APR calculation. This is generally because as estimated repayment periods get longer, the interest and other fees get spread across a longer time period, generally resulting in a lower APR (see below for more details).

    • This can be tricky, as extremely long-term loans could boast a very low APR, but the total cost of credit (amount disbursed to you plus interest and fees) may be more, especially if interest is accruing over that entire period. 

  • When the cost of credit includes a fee that is repaid over time (like Toast Capital Loans), the APR will increase with a shorter repayment period because the APR is designed to express the average cost of credit over a one year periodThis does not mean that you are paying more; it just means that over a shorter period of time, more of your periodic payments will go toward paying down the fee than if you took a longer time to repay.

  • Here is an example: With each payment you make, typically some of the payments will go toward the fee and some will go toward the principal. 

    • Let’s say you have a $10,000 loan and a $1,200 fee. If you had a 12-month loan, you would be paying $100 each month toward the fee. 

    • But if you had a 6-month loan, you would be paying $200 each month toward the fee. 

    • Because the monthly cost of your loan is more, your APR will increase, but this does not mean that you are ever going to pay more than $1,200.

Why am I getting this form? Why do I need to sign it?

  • Certain states, such as New York, have new regulations that require a disclosure to be made to consumers regarding commercial financing transactions, such as Toast Capital Loans.

  • This disclosure requires additional information to be provided to you, such as an APR and estimated monthly cost, with the aim of helping borrowers understand the costs and benefits of financing offers, and to compare different offers to find the best financing solution to meet their needs.

    • That being said, while helpful, the APR isn’t always an apples-to-apples comparison of different loan offerings (see “Why is my APR higher than other offers?” above)

  • In order to sign and complete your Credit Agreement, you will need to sign this form as part of the newly-effective regulation.

What is the “finance charge” on my form?

  • This is the fixed loan fee for your Toast Capital Loan. 

  • This fixed fee will not change — i.e. it won’t increase if you take longer to pay off what you owe.

I thought Toast Capital Loans don’t have interest rates?

  • Toast Capital Loans do NOT have any associated interest, including compounding interest — only one fixed fee.

  • The APR is not an interest rate; it is a calculation that incorporates the amount and timing of the funding you receive, fees you pay, and the periodic payments you make, and is used to help you evaluate different financing options.

Why does my form talk about monthly cost? Can I repay my loan monthly instead of daily?

  • Toast Capital Loans are automatically repaid daily as a percentage of your card sales processed through Toast. You will find the estimated daily repayment amount on your Offer Summary form in the “Estimated Payment” row.

  • The estimated monthly payment on this form is a calculation of your  average monthly cost, which can be used to help you compare the estimated monthly cost of your different financing options.

  • Your credit agreement contains information regarding how you can make prepayments, but automated daily repayments are the only periodic payment option for Toast Capital Loans.

What is my estimated term?

  • The estimated term and your target repayment term* are the same. This is an estimate of how many days it should take you to repay your loan based on the terms of your loan and information about your restaurant. 

  • You may take longer or shorter to repay depending on your daily sales revenue; however, any outstanding amount remaining 60 days beyond your target repayment term will be collected via ACH from your bank account. 

Is there a prepayment discount?

  • No, if you decide to repay early, you will still have to repay your total outstanding balance.

  • If you pay off the financing faster than required, you will not be required to pay additional fees.

Why does my Toast Capital Loan have collateral requirements?

  • “Collateral” in this case refers to all accounts receivable, other rights of payment, and payments made to you for goods and services, including your daily card-based sales processed through Toast, which are used to automatically repay your Toast Capital Loan. 

Toast Capital Loans are issued by WebBank. Loans are subject to credit approval and may not be available to borrowers in certain jurisdictions. WebBank reserves the right to change or discontinue this program without notice.

*Toast Capital Loans offer different target repayment terms ranging from 90 days to 360 days, depending on eligibility. The maximum repayment term is 60 days following the end of the target repayment term. Any outstanding balance due at the end of the maximum term will be collected automatically via ACH.