The True Cost of Capital – Part 1

A primer on today's options for financing, and their true cost.

Bonside Team
March 09, 2023

In today’s world of financing, we often hear:

Your interest rate is [percentage]
It’s interest free, but your fee is [dollar amount]
No interest, no fee – just a [fancy new term]

With everyone marketing “small business friendly” capital differently, it’s hard to parse out how friendly it really is.

We’re breaking it down, and starting with calculating the MOIC – the Multiple on Invested Capital owed.

If 1.6x is owed, that implies you’re paying ([Borrowed Amount]*1.6) in total. Note – all numbers all illustrative and for example purposes. Bonside MOIC varies by deal.

At Bonside, MOIC is a key term we share to provide full transparency on actual dollars owed.

It’s intuitive to how you operate a business because it makes it immediately clear how much you are paying for the dollars you are borrowing.

While MOIC is an important part of the equation, so are a few other factors:

Time to repay
Repayments as a % of revenue
Total financing amount
Guarantees and collateral requirements

Examining each of these variables is key to understanding your options. Over the course of this series, we’ll continue to uncover the trade-offs amongst today’s financing options – Part 2 and Part 3 now live.