Owners compare lenders on the interest rate because it is the easiest number to find. It is also the least useful one. A fair comparison looks at the all-in cost over the real term, what the money actually lets you do, and what it costs to not have it.
All-in cost
Add the annual interest, the lender fee amortized over the expected term, and third-party costs. A bank line at prime plus a margin with an annual review fee can look cheap until you add the cost of the covenant breach that cuts it in half in March. A private facility with a higher rate and a fee can be cheaper over eighteen months if it closes the deal that doubles revenue.
Availability
A line you cannot draw on is not cheap at any rate. Ask how availability is set, how often it changes and what triggers a reduction. Bank lines reset annually against the statements; asset-based lines reset monthly against the collateral.
The cost of not closing
- A missed acquisition closing date and the deposit that goes with it
- A contract declined because the working capital was not there
- A CRA payment plan refused because arrears were not cleared
- A partner buyout delayed through another year of disagreement
None of those appear on a rate comparison, and each of them usually costs more than the spread between a bank and a private lender. Price the decision, not the loan.
Have a situation like this? Tell us about the deal and a principal will respond within two business days. Cascade lends to businesses only, in Canadian dollars, and every rate we quote is an annual rate.
