The True Cost of Capital – Part 2
A 60-second primer on today's options for financing.
With everyone marketing “small business friendly” capital differently, it’s hard to parse out how friendly it really is.
In Part 1, we covered the importance of considering MOIC (Multiple on Invested Capital) or the actual dollars owed. This week in Part 2, we’re discussing measuring the time to repay.
Note – all numbers are illustrative examples. Bonside’s term varies by deal.
Longer term products (i.e. loans) are generally more favorable because they give you time to realize a return on the borrowed capital. However, these products often come with accrued interest, personal guarantees, and collateral requirements.
On the other hand, you can access shorter term products (i.e. Merchant Cash Advances) without those onerous add-ons. But if you have to pay it back in under a year, is that enough time to realize any return on that borrowed capital?
If it’s for an inventory purchase order, maybe.
If it’s for a buildout, probably not.
Until now, there hasn’t been a good middle ground for brick-and-mortar. That’s why we created Bonside – Part 3 now live.