What does a first warehouse line cost a Latin American lender?
A base rate plus a margin on the money drawn, and fees on the rest: the margins in four filed credit lines, the fee schedule that makes an empty line expensive, and what one Mexican SME lender paid lender by lender.
A first warehouse line costs a floating base rate plus a margin on what the lender draws, and fees on what it does not. In filed contracts the margin ran 3.0 points over LIBOR for On Deck in 2018 and 4.0 for Upstart in 2020; Goldman Sachs charged a Mexican SME lender TIIE plus 6.25.
The price is a base rate plus a margin, and the margin follows the collateral
A warehouse line is a revolving loan secured by a pool of the lender's own loans, usually held in a trust or a special purpose vehicle. The lender draws advances against eligible loans and pays interest only on the advances. The rate floats: LIBOR in the US contracts of 2018 to 2020, SOFR today, the TIIE interbank rate in Mexico. The margin on top is fixed for the life of the line, and it is the number a term sheet negotiates.
Four agreements filed with the SEC show where the margin sits. Wells Fargo lent to a vehicle holding corporate loans, managed by a business development company, at 1.80% over LIBOR on broadly syndicated loans and 2.30% on the rest. On Deck's lenders, with Ares as agent, funded its US small business loans at «1 Month LIBOR + 3.0%». Goldman Sachs lent to Upstart against consumer loans at 4.0% before the end of the revolving period and 5.0% after. And Goldman Sachs lent to Covalto, a Mexican SME lender, at «TIIE plus 6.25%» against loans pledged to a Mexican trust.
Margin over the floating base rate and the fee on the undrawn limit, as written in the agreements or the filing that describes them. New Mountain Guardian III SPV and Wells Fargo, loan and security agreement of 30 August 2019 as amended (Exhibit 10.1 to a Form 8-K of 2022); On Deck Capital, Form 8-K of 8 August 2018; Upstart Loan Trust and Goldman Sachs Bank USA, credit agreement of 22 May 2020 (Exhibit 10.11 to Upstart's Form S-1); Covalto Ltd., Form F-4 of 3 January 2023, loan dated 11 March 2019.
| Lender and borrower | Loans pledged | Base rate | Margin | Fee on the undrawn limit |
|---|---|---|---|---|
| Wells Fargo to New Mountain Guardian III, 2019 | Corporate loans, managed by a business development company | LIBOR | 1.80% syndicated, 2.30% other | 0.50%, and 2.00% above a threshold |
| On Deck's lenders, Ares as agent, 2018 | US small business loans | 1-month LIBOR | 3.0% | Not stated in the filing |
| Goldman Sachs to Upstart, 2020 | US consumer loans | LIBOR | 4.0%, then 5.0% after the revolving period | 0.10% to 1.0% by utilisation |
| Goldman Sachs to Covalto, 2019 | Mexican SME loans in a trust | TIIE | 6.25% | Not stated in the filing |
The base rate sets the level and the collateral sets the margin. Loans that a fund can price from public data borrow at under 2.5 points; small business and consumer loans that it has to model cost 3 to 4; a Mexican SME book behind a trust cost 6.25.
The fees fall on the undrawn part, and the minimum draw is paid as if drawn
The Upstart agreement, Exhibit 10.11 to the company's Form S-1, writes the fees out in full. The unused fee is 0.10% a year when more than 75% of the limit is drawn, 0.40% between 50% and 75%, 0.70% between 25% and 50%, and 1.0% below 25%. It is charged on «the excess of the Facility Limit … over the greater of (A) the Minimum Utilization Amount and (B) the aggregate outstanding principal balances of the Advances».
In the same exhibit the Minimum Utilization Amount is 35% of the limit during the revolving period. When the lender draws less, it pays the full margin on the shortfall: the fee is «the product of (a) the Applicable Margin, (b) … the Minimum Utilization Amount minus … the outstanding principal amount of all of the Advances». The first 35% of the line earns the lenders their margin whether or not a peso or dollar is drawn.
Two more charges complete the price. The New Mountain agreement, Exhibit 10.1 to a Form 8-K, sets a structuring fee of 1.00% of the facility amount at closing, paid in two equal instalments; Upstart's up-front fee sits in a fee letter that was not filed. After a default the rate steps up: Upstart's by 2.50 points, New Mountain's margin to 3.25%.
the share of a line the lender pays for whether it draws it or not
Upstart and Goldman Sachs, 2020: the shortfall below 35% pays the full margin.
A line drawn at a fifth costs about twice its headline rate
Put the fees through one line and the price depends on how much of it is used. We took a $20 million limit on the Upstart schedule, a margin of 4.0 over a 30-day SOFR of 3.65%, and New Mountain's 1.00% structuring fee spread over three years, then divided the year's cost by the amount drawn.
Worked example, modelled: limit $20m; interest at 30-day average SOFR of 3.65% (derived from Variant Alternative Income Fund's annual report at 30 April 2026) plus a 4.0% margin; unused fee ladder and 35% minimum utilisation as in the Upstart agreement of 2020; structuring fee of 1.00% of the limit (New Mountain agreement) over a three-year revolving period. The 360-day year of the agreements is ignored. Our computation, offered as such.
| Share drawn | Drawn | Interest | Minimum utilisation fee | Unused fee | Structuring fee | Cost per dollar drawn |
|---|---|---|---|---|---|---|
| 10% | $2.0m | $153,000 | $200,000 | $130,000 | $66,667 | 27.5% |
| 20% | $4.0m | $306,000 | $120,000 | $130,000 | $66,667 | 15.6% |
| 35% | $7.0m | $535,500 | $0 | $91,000 | $66,667 | 9.9% |
| 50% | $10.0m | $765,000 | $0 | $70,000 | $66,667 | 9.0% |
| 75% | $15.0m | $1,147,500 | $0 | $20,000 | $66,667 | 8.2% |
| 100% | $20.0m | $1,530,000 | $0 | $0 | $66,667 | 8.0% |
Even a full line costs 8.0%, above the headline 7.65%, and the gap grows as the line empties. Below the 35% minimum the lender pays margin on money it did not take, so a first line sized to ambition rather than to the loans it can pledge in the first months is the most expensive money it will raise.
In Mexico, the one lender that itemised its debt paid least where loans secured the money
Covalto, a Mexican SME lender, listed every loan it owed in a Form F-4 filed with the SEC on 3 January 2023: lender, currency, rate and what secured it. It is the only Mexican non-bank whose funding prices we have found in a public filing line by line.
Covalto Ltd., Form F-4 filed with the SEC on 3 January 2023, borrowings at 30 September 2022 as described in the filing; outstanding amounts in US dollars as reported. FIRA lent through the bank Covalto had acquired, Banco Finterra. Dollar and peso rates are not comparable point for point: a dollar loan to a peso lender carries the exchange risk on top.
| Lender | Currency | Rate | Security | Outstanding |
|---|---|---|---|---|
| FIRA, through Banco Finterra | Pesos | TIIE plus 1.3% | Loans to clients | $54.1m |
| Goldman Sachs Bank USA, through trust F/3837 | Pesos | TIIE plus 6.25% | Loans pledged to the trust, non-recourse | $43.9m |
| NIC RMBS | Dollars | 12.0% | Pledge of loans, receivables and leases | $2.3m |
| Blue Like an Orange Sustainable Capital | Dollars | 16.6% | Pledge and debt service reserve account | $8.3m |
| Calvert Impact Capital | Dollars | Five-year Treasury plus 7.25%, at least 9.25% | None | $3.1m |
| PG Impact | Dollars | 10.75% | None | $7.8m |
| US International Development Finance Corporation | Dollars | 12.0% | None | $14.0m |
| Tactical Infrastructure | Pesos | 18.5% | None | $9.9m |
In pesos, the development bank's line through Covalto's bank cost TIIE plus 1.3, the commercial line against a trust TIIE plus 6.25, and the unsecured loan 18.5%. The trust line is the price a commercial bank or fund puts on a Mexican SME book it can foreclose.
The trust is what the margin buys. Goldman lent to the trust, not to the company: the Form F-4 says the loans were «non-recourse to Covalto as they are secured by loans pledged to the trust (fideicomiso), for which we receive an advance rate». The line was not full either. At 30 September 2022 Covalto reported $35.0 million undrawn on it against $43.9 million drawn.
Covalto's average cost of funding fell from 16.6% in 2020 to 13.8% in 2021 and to 9.3% in the first nine months of 2022, which the Form F-4 credits to «lower-cost debt facilities and deposits we acquired as a result of the Bank Acquisition». The last step came from owning a bank, and a SOFOM without one does not have it.
A first commercial line is priced above the rated sector's average funding
HR Ratings reads the audited statements of 84 rated Mexican non-bank institutions. In the twelve months to June 2026 they paid 12.4% on debt that bears interest, while the 28-day TIIE averaged 7.5%: 4.9 points over the base rate, across lenders that are larger, rated and partly funded on the stock market. At that average TIIE, the Covalto trust margin gives 13.75%, our computation.
Dollar money from a US fund sits higher. Variant Alternative Income Fund lent to Leasy Mexico, a leasing company, at a fixed 15.75% in August 2025, and to a Peruvian leasing trust of the same group at 15.75% in July 2025. Against the 30-day SOFR of 3.65% the same report implies, that is 12.1 points, before the lender hedges the peso.
Margins, fees and Covalto's rates are as written in the filings named; the effective cost by share drawn, the 13.75% and the spreads over SOFR and TIIE are our computation from them.
Questions this raises
- What does a warehouse line cost a non-bank lender?
- A floating base rate plus a margin on the amount drawn, plus fees on the undrawn limit. In filed agreements the margin was 3.0 points over one-month LIBOR for On Deck in 2018, 4.0 for Upstart in 2020, and 6.25 over TIIE for Covalto, a Mexican SME lender, on a line from Goldman Sachs secured by a trust.
- What is an unused fee on a credit line?
- A fee on the part of the limit the borrower has not drawn. In Upstart's 2020 line with Goldman Sachs it fell as the line filled: 1.0% a year below 25% drawn, 0.70% up to 50%, 0.40% up to 75% and 0.10% above, charged on the limit minus the greater of the draw and the minimum utilisation amount.
- What is a minimum utilization fee?
- A charge that makes the borrower pay as if it had drawn a minimum share of the line. In Upstart's 2020 agreement the minimum was 35% of the limit during the revolving period, and any shortfall paid the full 4.0% margin, so the first 35% of the line cost the margin whether it was used or not.
- How do you calculate the effective cost of a warehouse line?
- Add a year of interest on the drawn amount, the minimum utilisation fee, the unused fee and the structuring fee spread over the life of the line, then divide by the amount drawn. On a modelled $20m line at SOFR plus 4.0, the cost per dollar drawn is 15.6% at 20% drawn, 9.0% at half and 8.0% when full.
- How much do Mexican non-bank lenders pay for funding?
- HR Ratings puts the average cost of interest-bearing debt of 84 rated Mexican non-bank institutions at 12.4% in the twelve months to June 2026, against an average 28-day TIIE of 7.5%. Covalto's filing showed a development bank line at TIIE plus 1.3, a commercial trust line at TIIE plus 6.25 and an unsecured peso loan at 18.5%.
Where every figure on this page comes from6 sources
- 01Upstart Loan Trust and Goldman Sachs Bank USA, Amended and Restated Revolving Credit and Security Agreement, 22 May 2020, Exhibit 10.11 to Upstart Holdings' Form S-1 filed with the SEC on 5 November 2020: definitions of Applicable Margin, Interest Rate, Post-Default Rate, Unused Fee Rate, Minimum Utilization Amount, Minimum Utilization Fee and Up-Front Fee; section 2.06.
- 02On Deck Capital, Form 8-K filed with the SEC for 8 August 2018: ODAF II asset-backed revolving facility, commitment $175.0 million, interest rate 1-month LIBOR plus 3.0%.
- 03New Mountain Guardian III SPV and Wells Fargo Bank, Loan and Security Agreement of 30 August 2019 as amended, Exhibit 10.1 to a Form 8-K filed with the SEC in 2022: Applicable Spread, Non-Usage Fee Rate and Structuring Fee, section 2.11.
- 04Covalto Ltd., Form F-4 filed with the SEC on 3 January 2023: description of borrowings at 30 September 2022, undrawn lines of credit and cost of funding.
- 05HR Ratings, NBFIs Sector Analysis 2026, 25 August 2026: sample of 84 rated non-bank financial institutions, passive rate and average 28-day TIIE at 2Q26.
- 06Variant Alternative Income Fund, Annual Report at 30 April 2026: Schedule of Investments, specialty finance loans to Leasy Mexico and to the Arrendamientos Leasy II trust, and the SOFR-indexed loans from which the 30-day SOFR is derived.