Fixed or floating: how a private credit facility is priced

Borrowers naturally focus on the interest rate, but the true cost of a private credit facility is the combination of rate, fees, term and flexibility. Understanding how each piece works makes it easier to compare offers and to choose the structure that fits the plan.

Fixed rates

Most private bridge and real estate loans carry a fixed rate for the term. A fixed rate gives certainty over a short horizon and makes the exit easier to plan. It suits transactions where the timeline is defined and the borrower values predictability.

Floating rates

Revolving asset-based facilities and some longer term loans are priced at a margin over a reference rate, typically the Canadian prime rate. A floating rate moves with the market, which can help in a falling-rate environment and hurt in a rising one. It suits facilities that are drawn and repaid over time rather than funded once.

Fees and the all-in cost

A lender fee at funding, a broker fee where a broker is involved, legal and appraisal costs and any renewal or extension fees all form part of the cost of the loan. Express everything as an annualized all-in cost over the expected life of the loan, and compare offers on that basis rather than on headline rate alone.

Flexibility has value

Prepayment rights, extension options and the ability to substitute security are worth money, especially on a bridge loan where the exit date is uncertain. A slightly higher rate with better flexibility often costs less in the end than a cheaper loan that cannot bend.