There is a multi-billion dollar industry built on the premise that NJ importers don't know how to calculate the true cost of their capital. Commercial finance products are almost never quoted as APR — they're quoted as factors, as percentages per period, as discount rates, as "cents on the dollar." The translation to a comparable annual cost requires math that most busy importers don't have time to do.
This brief does that math — for every material trade finance product available to NJ importers operating through Port Newark and warehousing in Carteret.
The APR Translation Problem
Consider four equivalent offers, all for $500,000 in capital for 90 days:
- Offer A: "3% per month" → 9% cost → APR: 36%
- Offer B: "Factor rate of 1.12" → repay $560K → APR: 48%
- Offer C: "1.5% bi-weekly" → 9.75% cost → APR: 39%
- Offer D: "4% for the transaction" → $20K cost on $500K for 90 days → APR: 16%
Rule: Always convert every capital quote to an annualized rate before comparing. Divide the total fee by the advance amount, divide by the term in days, multiply by 365. Offer D sounds most expensive — but it's the cheapest by APR.
Institutional vs. Sub-Prime: The Full Cost Comparison
| Product | Stated Rate | True APR Range | Lien Impact | Rating |
|---|---|---|---|---|
| Bank LOC | Prime + 1–3% | 8–14% | Specific collateral or blanket | Best — if accessible |
| SBA 7(a) Trade Finance | Prime + 2.25–2.75% | 9–16% | Blanket | Excellent — slow process |
| Sentinel PO Financing | 2.5–4.5% per 60–90 days | 10–22% | PMSI (narrow) | Strong — purpose-matched |
| Non-Bank LOC | 1.5–3% per 30 days | 18–36% | Blanket A/R | Acceptable — review terms |
| Recourse Factoring | 2–3.5% per 30 days | 24–42% | Blanket A/R | Use cautiously |
| Revenue-Based Lending | 1.1–1.3x factor rate | 40–80% | Blanket | Avoid — rarely appropriate |
| Merchant Cash Advance | 1.2–1.5x factor rate | 60–150%+ | All-assets blanket | Avoid — last resort only |
The Sub-Prime Cascade: How Importers Get Trapped
- Q4 cash crunch: Holiday inventory investment depletes cash reserves.
- MCA #1: $150K MCA at 1.3 factor rate. Daily withdrawal of $1,200. All-assets blanket lien filed.
- Q1 revenue dip: January sales slow. Daily ACH withdrawals continue. Cash drops further.
- MCA #2 (stacking): Second MCA at 1.4 factor. Now two daily ACH withdrawals totaling $2,100/day.
- Institutional financing blocked: Sentinel reviews UCC filings. Two blanket liens in place. Some lenders decline entirely.
- MCA #3: Only option remaining is another sub-prime advance at 1.45x. The cycle compounds.
The institutional exit from this cycle requires either: (a) sufficient cash flow to pay off all MCA obligations and clear the liens, or (b) a structured refinancing where a senior lender pays off MCAs. Sentinel has structured refinancing facilities for Carteret importers exiting sub-prime positions.
Interactive: PO Stepper — Capital Cost Calculator
Lateral Relevancy
Cost of capital is a function of your lien environment. Existing liens affect the rates available to you.
Ready to reduce your cost of trade finance capital? Initialize your Funding Analysis or call (888) 653-0124.
DISCLAIMER: Sentinel Trade Finance | Carteret, NJ 07008 | (888) 653-0124 | Rate data is illustrative and based on publicly available market benchmarks as of 2024–2025. Actual rates vary by lender, creditworthiness, and transaction structure. Not financial advice. Consult qualified financial advisors. Financing subject to underwriting and approval.