The True Cost of Capital – Part 1

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.

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.