You are 100% correct in that. Whenever I consider this type of capital loan for my small business (physical products) the order of operations is always "Am I going to run out of cash or inventory if I don't use this?" before looking at how good the borrowing rate is. If I overpay on the APR, it's probably a good problem; if I don't sell through, then the bank is suffering with me (as you noted).

SBA loans have better rates, but require more work. I particularly like the American Express model, where they extend credit to pay a merchant invoice directly. You repay the credit in 30/60/90 days and you pay 12% (which used to be 9%).