Business Owners: Why Loan Pricing Shouldn’t Be Your Top Priority

When business owners begin evaluating asset-based lending (ABL) proposals, many instinctively focus on finding the lowest interest rate available. At first glance, this seems like a savvy move; after all, saving on financing costs feels like a win. But in the world of ABL, obsessing over rate alone can lead to costly missteps.

The real value of a lending relationship isn’t just measured in percentage points. It’s measured in how well the financing structure supports your operational goals, adapts to your growth goals, and responds when business conditions shift.

In this article, we’ll explain why interest rates should never be your main consideration, and why working with the right asset-based lender can make all the difference in your company’s long-term success.

The Hidden Costs of Chasing The Lowest Interest Rate

Focusing exclusively on price often masks the deeper value an ABL partner can provide. In many cases, the lowest-cost loan can come with trade-offs that restrict your flexibility, limit growth, or even jeopardize your operations.

Key Pitfalls of Prioritizing Loan Cost Over Fit

1. Rigid Loan Structures That Hinder Growth
Asset-based loans are designed to flex with your business. But not all ABL structures are created equal. If you’re chasing the cheapest rate, you may end up with restrictive terms (covenants) that limit your ability to:

• Expand your inventory or equipment base.
• Increase headcount during scaling phases.
• Adapt to rapid changes in market demand.

When you’re working with a true ABL partner, the focus is on enabling growth, not holding it back.

2. Limited Access to Real-Time Decision-Makers
In ABL, speed and communication are critical. If you can’t get fast answers from your lender, you risk missing time-sensitive opportunities. A responsive ABL partner offers:

• Direct access to decision-makers.
• Fast approvals on draw requests or restructuring needs.
• Ongoing collaboration based on your real-time business needs.

3. Lack of Flexibility During Disruption
Economic cycles and supply chain challenges are part of doing business. Asset-based lenders understand this and evaluate risk based on the strength of your underlying assets, giving you more room to navigate downturns without risking your financing.

An inflexible loan agreement, even at a lower interest rate, can expose you to unnecessary risk when the unexpected happens.

4. Hidden Costs That Raise the Real Price
A low headline interest rate doesn’t always mean a low-cost loan. Be wary of:

• Unused line fees.
• Late payment penalties.
• Early termination clauses.
• Restructuring charges.

These costs can quietly increase your true borrowing expense and strain your cash flow. The right ABL lender will offer transparency and terms that align with your business reality.

Why Strategic Financing Drives Long-Term Success

Smart businesses don’t just look for the cheapest capital; they look for capital that works for them. The right ABL partner should offer more than funding; they should deliver structure, insight, and stability.

Ask These Questions Before Choosing a Lender:

1. Is This Financing Built for My Growth?
Asset-based lending is inherently scalable. As your eligible assets (accounts receivable, inventory, or equipment) increase, your available credit expands. A quality ABL partner structures your facility to grow with you, enabling:

• Expansion into new markets.
• Seasonal ramp-ups.
• Acquisitions or restructuring.

2. Will My Lender Stand by Me in a Downturn?
A strong ABL relationship includes support through challenges. Because lending is secured by tangible assets, the right lender can offer greater flexibility during:

• Revenue slowdowns.
• Supply chain disruptions.
• Customer payment delays.

This resilience can make the difference between surviving a storm or being overwhelmed by it.

3. Can I Reach the People Who Make Decisions?
Timing is everything in business. A direct line to the people who control your funding ensures you get:

• Fast decisions on new advances.
• Custom solutions when needs shift.
• Clear answers without red tape.

ABL lenders are built for speed and accessibility, two things traditional financing simply can’t match.

4. Do the Terms Fit My Business Model?
Asset-based loan structures offer freedom in how funds are used. Whether you’re financing growth, funding a turnaround, or investing in new opportunities, an ABL structure provides the flexibility to move fast and with confidence.

What Is Asset-Based Lending and Why Does It Work?

Asset-based lending allows you to unlock working capital by leveraging your company’s existing assets. Your accounts receivable, inventory, equipment, or real estate become the foundation of a flexible, growth-friendly credit facility.

ABL is Ideal For:

• Companies experiencing rapid growth.
• Businesses in cyclical or seasonal industries.
• Firms undergoing restructuring or M&A activity.
• Enterprises facing short-term cash flow gaps.

Key Benefits of Asset-Based Lending

• Scalability: Credit availability grows with your assets.
• Speed: Faster funding and streamlined approval processes.
• Flexibility: Funds can be used where you need them most.
• Resilience: Decisions based on asset value, not just profit.
• Partnership: Work with professionals who understand your business.

Real-World Example: Choosing Partnership Over Price

Let’s compare two companies with similar profiles but very different financing outcomes.

Company A
Pursues the lowest interest rate from a provider. Within months, seasonal revenue drops. Unable to cover payroll triggers a covenant violation. The lender freezes their line of credit; they miss critical opportunities and stall growth.

Company B
Selects an asset-based lender offering a slightly higher interest rate but no covenants. The terms are structured for flexibility, and borrowing availability adjusts weekly based on receivables. When cash flow dips, the lender works with them. They maintain operations, retain staff, and continue scaling.

The takeaway? The right partner doesn’t just fund your business; they help you grow it.

Final Thoughts: Choose Value, Not Just Rate

It’s tempting to focus on the lowest interest rate when evaluating financing, but that approach can limit your business rather than empower it. In the world of asset-based lending, what matters most is the value the lender brings to the relationship.

Choose a financing partner that understands your business model, offers tailored and flexible solutions, and stands with you through all phases of growth. When you align with the right asset-based lender, you’re not just borrowing money, you’re gaining a strategic advantage.

About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power, and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset-based financing solutions from $500,000 to $8 million with no financial covenants.

As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.

If you know of, or are, a business in need of non-traditional financing, contact Mark Hafner at 800.742.0733 or mhafner@celticcapital.com, or visit us at celticcapital.com.