Compensating Balance Requirements & Effective Annual Rate Analysis

This template analyzes the true cost of credit facilities by computing effective annual rates (EAR) when compensating balance requirements and commitment fees apply. It models how reserve requirements reduce available funds while fees accumulate on unused credit portions, revealing the hidden costs embedded in commercial lending arrangements.

Ideal for treasury managers, CFOs, and business finance teams evaluating credit line offers from banks. By comparing stated rates against effective rates, you identify the most economical financing options and understand the real impact of banking covenants on your cost of capital.