Just because the cost to borrow is higher than the effective rate of the cash discount does not mean that the company should offer the cash discount. The cash discount should be offered only if there is a need for cash in the short-term as well or if a discount needs to be offered in order to remain competitive within the market..
If the company could borrow money at a rate lower than the rate related to the cash discount, they should borrow the money and not offer the cash discount.
Whether or not the cost of capital is close to the prime rate is not a determinant of whether the company should issue the cash discount. The cash discount should be offered if the seller needs cash, the effective interest rate of offering the discount is lower than to borrow funds, or it needs to be offered in order to remain competitive within the market.
Cash discounts should be offered only if competitors are offering them and thus customers expect such a discount or if the seller needs cash and is not able to borrow it elsewhere at a lower rate.
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