2 min read
Definition
An interest rate collar pairs a cap with a floor. Your rate cannot rise above the cap or fall below the floor, so it moves only within the collar’s band. Selling the floor helps fund the cap, so a collar is often cheaper than a standalone cap.
In plain terms
You give up the best-case low rates to make the worst-case high rates cheaper to insure against. Certainty within a range.
Why it matters for your company
A collar suits a borrower who wants budget certainty and will accept giving up the downside. See hedging a variable loan.
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Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.