pricing
Yield
Yield is the total return a lender earns on a loan or advance, expressed as an annualized percentage of the capital deployed.
Definition
What it means.
From the lender's perspective, yield is what a borrower's cost (APR, factor rate, fees) looks like from the other side of the transaction. Understanding yield helps borrowers anticipate lender behavior: a lender with a minimum yield requirement of 18% will not offer a 12% APR product without additional fees that bring the effective yield up to threshold.
Yield is also why prepayment can be complicated. When a borrower pays off a loan early, the lender receives less total interest than projected, lowering the actual yield. Prepayment penalties are the lender's mechanism for protecting their minimum yield on early payoffs. Factor-rate products sidestep this entirely by fixing total repayment at origination regardless of timing.
Example
A $100,000 loan at 18% APR over 24 months generates $19,560 in interest, an 18% yield. If the borrower pays off in month 12, the lender earns only $9,780, a 9.78% yield on 12 months of deployed capital.
Now what?
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