The formula
Effective annual rate = Total cost ÷ Amount × 365 ÷ Days × 100
The interest component is straightforward pro-rating; the distortion comes from fixed costs spread over short windows. A 1% arrangement fee on a 90-day facility adds four points to the annualised rate — the same fee on a 12-month facility adds one. This is why rolling short facilities repeatedly is one of the most expensive borrowing patterns in trade.
The effective annualised figure is the only number comparable across offers: a 12% facility with 2% fees on 60-day tenors is dearer than a 16% facility with no fees. Annualise every offer, including the ones quoted per-month — 2.5% per month is 30% per year before fees, a figure that reads differently.
How to use this calculator
- 1
Collect the full fee schedule
Interest rate, arrangement or facility fee, documentation and drawdown charges, and any commitment fee on undrawn amounts.
- 2
Match tenor to the real cycle
Finance the actual cash gap — the Order Cash Flow Calculator computes it — not a round number. Overshooting tenor pays interest on days you did not need.
- 3
Annualise and compare
The effective rate across at least two offers, plus the do-nothing alternative priced honestly.
- 4
Check the covenants
Security, personal guarantees and covenant terms carry costs the rate does not show — a cheap facility with a blanket lien is not cheap.
What trade finance should beat
A facility is justified when its effective rate is below what the financed cash earns or saves. The comparators: early-payment discounts captured (2/10 net 30 terms return ~37% annualised — almost always worth financing), orders accepted that strained cash would have declined (margin on incremental business), and buffers preserved through the cycle (the cost of a distressed week dwarfs facility rates). Financing at 19% to capture 37% is good treasury.
The comparison fails when facilities fund losses rather than cycles: financing a cash gap that recurs because margins are too thin does not bridge a timing problem, it postpones a pricing one — at compound interest. The facility’s tenor should map to a self-liquidating event: goods arriving, selling, collecting. If no such event exists, the problem is not financeable.
Instrument fit: matching the tool to the gap
Trade finance is a family, not a product. Import loans and invoice financing bridge the order cycle this calculator prices. Letters of credit substitute bank credit for buyer trust — costing issuance and confirmation fees but unlocking suppliers who will not ship against your name alone. Supply-chain finance lets large buyers’ credit ratings finance their suppliers’ receivables. Each prices differently; the Academy trade-finance guides map the family.
Structured payment workflows reduce the financing need itself: deposit-and-balance schedules matched to production milestones mean less cash out for less time, and escrow-style arrangements on eligible routes let buyers pay early in commitment but late in cash release. KeyBS Pay corridor pages document structured options per route — cheaper than financing the gap is shrinking it.
Common use cases
Facility comparison
Annualise competing offers, fees included, before signing either.
Discount capture decisions
Price borrowing against the annualised return of early-payment discounts.
Order feasibility
Add financing cost to landed cost and confirm the order still clears margin.
Tenor optimisation
Test how much shortening the financed window saves across a year of cycles.
Automate this with the API
Map the financed order’s payment legs against the facility tenor.
curl "https://keybs.io/api/v1/tools/payment-plan?value=100000&deposit_pct=30&lead_weeks=6&ship_weeks=6" \ -H "x-api-key: YOUR_FREE_KEY"Free Tools API docs and key registration
Frequently asked questions
Why does my 14% facility cost 19% effectively?
Fixed fees over short tenors. Interest pro-rates with days, but a 1% arrangement fee costs 1% whether the money is out for 90 days or 365 — annualised over 90 days it alone adds about 4 points. The shorter the tenor, the more the fee schedule, not the rate, decides the true cost.
Per-month rates look small — how do I compare them?
Multiply by twelve before comparing, then add fees. A "2% per month" trade facility is 24% annually before arrangement costs — competitive in some markets, expensive in others. Every offer should be reduced to one number: effective annualised rate, all-in. This calculator produces it.
When is borrowing for early-payment discounts correct?
When the discount’s annualised return exceeds the facility’s effective rate — commonly true, since 2/10 net 30 returns ~37% and most trade facilities cost less. The Early Payment Discount Calculator computes the discount side; this one the borrowing side. The spread between them is riskless margin.
What security will trade finance require?
Ranges from unsecured (established relationships, strong financials) through goods-secured (the financed shipment itself, via document control) to personal guarantees and blanket liens at the demanding end. Security terms belong in the comparison alongside rate — a lien over all receivables constrains future borrowing in ways a two-point rate difference does not.
Does invoice financing beat an import loan?
They finance different ends: import loans fund the payable (paying your supplier), invoice financing funds the receivable (advancing your customer’s invoice). A full cycle can use either or both; price each against the days it actually covers. Receivables financing rates also reflect your customers’ credit, not just yours — sometimes an advantage.
Does KeyBS Pay provide trade finance?
KeyBS Pay’s core is the payment and FX layer — committed quotes, structured deposit-and-balance workflows, and escrow-style arrangements on eligible routes that reduce how much financing an order needs. For the financing itself, the effective-rate arithmetic here applies to any provider’s offer; corridor pages document payment structuring options per route.
Corridors, tools and reading for this calculator
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