How business loan repayments work
A term loan for a business is repaid in fixed monthly instalments that cover interest and repay the amount borrowed by the end of the term.
Interest is worked out monthly at one twelfth of the annual rate. Lenders may calculate interest differently (some charge it daily), so your actual payments can differ slightly.
Worked example
Borrowing £50,000 at 8% over 5 years costs £1,013.82 a month. The business would repay £60,829.18 in total, including £10,829.18 of interest.
What lenders look at
Lenders look at the business's trading history, accounts and cash flow. For smaller or newer businesses they may also ask directors for a personal guarantee, which makes them personally liable if the business can't repay.
Loans can be secured against business assets or unsecured. Check the total amount repayable and any arrangement or early repayment fees when comparing offers.
Inputs for the business loan calculator
Amount to borrow
The amount the business wants to borrow.
Interest rate (per year)
The annual interest rate on your loan. The rate shown is only an example, so enter the rate from your quote. Interest is worked out monthly at one twelfth of the annual rate. Lenders may calculate interest differently (some charge it daily), so your actual payments can differ slightly.
Term
How many years the loan is repaid over.
CALCULATOR QUESTIONS
Business loan calculator questions
How are business loan repayments calculated?
For a standard term loan, equal monthly payments cover the interest and repay the loan by the end of the term, the same way as this calculator works.
What is a personal guarantee?
A promise by a director or owner to repay the loan personally if the business can't. Lenders often ask for one from smaller businesses.
Is interest on a business loan tax-deductible?
Interest on borrowing for business purposes is generally an allowable expense. Check with an accountant for your business's situation.
Does this include fees?
No. Add any arrangement or other fees from your quote when comparing the total cost.