Why business credit costs
The price of credit includes the work around it.
A loan price reflects more than the cost of the money. Evidence review, losses, capital, servicing and margin all matter.
Funding costs
The money has a cost.
A capital provider weighs the currency, duration, liquidity and risk of the lending commitment.
Operating costs
Smaller facilities still need operating work.
Identity checks, document review, decisions, payment handling and disputes take resources. Reusing reliable records is one way to reduce repeated work.
Credit risk
Losses and protection need to be priced.
Expected defaults and recoveries affect the economics. Protection has its own cost, conditions and funding requirements.
Comparing costs
Compare the full obligation.
Consider total cost, timing, repayment source, security and late-payment terms together. A lower headline rate alone does not make two facilities comparable.