Business Loan Calculator

Before you apply for a business loan, it pays to know what the repayments look like - not just per month, but the total cost of the borrowing over its whole term. Set the amount, term and interest rate below (plus any arrangement fee) and the calculator shows both, along with how the balance falls over time.

How loan repayments are calculated

Business loans are usually repaid in equal monthly instalments that cover both interest and a slice of the amount borrowed. Early payments are mostly interest - because the balance is at its largest - and later payments are mostly repayment, which is why the chart above curves rather than falling in a straight line.

Many lenders also charge an arrangement fee, typically 1-5% of the loan, either paid upfront or added to the balance. It doesn't change the monthly repayment much, but it's part of the true cost of the loan, so the calculator includes it in the total.

Example monthly repayments

At a representative 10% annual rate, with no fees:

Illustrative figures only - the rate you're offered depends on your business and the lender.

Notice the trade-off: stretching £50,000 from one year to five cuts the monthly payment from £4,396 to £1,062, but you pay interest for four extra years - the total cost rises from around £2,750 to around £13,700. Shorter terms cost less overall; longer terms are easier on monthly cash flow.

What affects the rate you're offered?

• Trading history and accounts - lenders want to see revenue that comfortably covers the repayments.

• Credit profile - both the business's and, for smaller companies, the directors'.

• Security - loans secured on assets (or backed by a personal guarantee) are cheaper than unsecured borrowing.

• Term and amount - very small or very short loans often carry higher effective rates.

Types of business borrowing

A term loan - the kind this calculator models - is the simplest option, but it's not the only one. Asset finance spreads the cost of specific equipment or vehicles, with the asset itself as security. Revolving credit facilities and overdrafts suit businesses whose need comes and goes, since you only pay interest on what you draw. Invoice finance advances cash against unpaid invoices, useful when slow-paying customers are the reason you're short. The right structure often matters more than a fraction of a percent on the rate.

Frequently asked questions

How much can my business borrow?

As a rule of thumb, lenders will consider up to around a quarter of your annual turnover for unsecured loans, and more where there's security. What matters most is affordability: repayments a lender can see you covering comfortably from cash flow.

Will applying affect my credit score?

Getting a quote usually involves a soft search, which doesn't affect your score. A full application involves a hard search that's visible to other lenders - so it's worth comparing options before applying, rather than applying to compare.

What's the difference between the interest rate and the total cost?

The rate prices each month's interest; the total cost adds up every payment plus any fees, minus the amount you borrowed. Two loans at the same rate can have very different total costs if the terms or fees differ - which is exactly what the calculator is for.

Can I repay a business loan early?

Usually, and doing so cuts the remaining interest - but check the agreement for early repayment charges, which some lenders use to recover part of that interest.