What to compare in business loan offers
Lenders present their offers differently, so convert each one to the same figures before you compare. Spark Finance calls total interest the definitive measure of cost and the monthly payment the least useful metric, and says APR suits loans with the same term and fees, so you should always turn an APR into pounds of interest before drawing conclusions. Kandoo's guide advises comparing the representative APR, the total repayable and the monthly repayment side by side.
Fees change the answer. Some lenders add the arrangement fee to the loan, so you pay interest on it, while others deduct it from the money you receive. A longer term lowers the monthly payment but usually increases the total interest. This calculator puts all of these into one table, using the same method for every offer.
Worked example: three offers for £50,000
Offer A is 8% a year over 60 months with a 2% arrangement fee deducted from the loan. The monthly payment is £1,013.82, the total interest is £10,829.18 and the fees are £1,000.00, so the total cost is £11,829.18, an APR of 9.23%, and you receive £49,000.00. Offer B is 6.5% over 60 months with a 3% fee and £500 of other fees. The payment is £978.31, the total interest £8,698.44, the fees £2,000.00 and the total cost £10,698.44, an APR of 8.54%, with £48,500.00 received.
Offer C is a flat rate of 4.5% over 48 months with a 1% fee and £250 of other fees. The payment is £1,229.17, the interest £9,000.00, the fees £750.00 and the total cost £9,750.00, an APR of 9.55%, and you receive £49,500.00. Offer C costs £2,079.18 less than Offer A overall, Offer B has the lowest payment and the lowest APR, and Offer C pays out the most cash.
Why the cheapest offer is not always the lowest APR
In the example Offer C has the lowest total cost but the highest APR. It is repaid over 48 months instead of 60, so you pay interest for less time, but a flat rate charges interest on the full amount throughout and its fees are spread over fewer months. If you want the least money out of your pocket and can afford the higher payment, the total cost points to Offer C. If you want the best rate for each pound borrowed, the APR points to Offer B.
That is why the calculator names a winner for each measure instead of one overall winner. Decide which matters for your business: cost, payment, the rate, or the cash in hand.
A lower payment can cost more overall
The same £50,000 at 9% with no fees costs very different amounts depending on the term. Over 24 months the payment is £2,284.24 and the total cost is £4,821.69. Over 48 months it is £1,244.25 and £9,724.10. Over 84 months it is £804.45 and £17,574.13. All three have an APR of 9.38%, so APR alone cannot tell them apart. The longest term has the lowest payment and costs £12,752.44 more than the shortest.
Fees: deducted, added or paid separately
Choose how the arrangement fees are taken. Deducted means you receive less than you borrow and repay the full amount. Added means the fee is added to the loan and you pay interest on it, so you receive the full £50,000. Paid separately means you pay the fee in cash. With the fees added in the example, the payments become £1,034.10, £1,007.66 and £1,241.46, and the total cost of Offer A rises to £12,045.77.
What this estimate leaves out
This is a planning estimate for fixed monthly repayments over the term you enter. It does not model interest-only periods, overpayments, early repayment charges, variable rates, personal guarantees, security or lender eligibility. Lenders may round payments or calculate interest differently, so the figures in your agreement are the ones that count.
To explore one offer in depth, with overpayments and early settlement, use the business loan calculator .
To work out an APR from an offer's payment and fees, use the business loan APR calculator .
Use the right country page
This page stays in pounds and uses UK terms: arrangement fee, flat-rate quotes and APR as the effective annual rate. The country choices above the inputs open separate local pages. Choosing United States opens the compare business loans calculator, which uses origination fees, closing costs and APR as the nominal annualised rate. The inputs reset and amounts are not converted.
Inputs for the business loan comparison calculator
Offers to compare
Two offers or three. The third offer is ignored when you choose two.
Arrangement fees are
Whether the fees are deducted from the loan, added to it or paid separately. It applies to every offer.
Amount you need
The amount you want to borrow, the same for every offer, before any fee is taken from it.
Rate type and rate
Nominal, APR or flat rate, exactly as each quote states it.
Term
The number of months you would take to repay each offer.
Arrangement fee and other fees
A percentage of the amount, plus any fixed legal or valuation costs paid in cash at the start.
CALCULATOR QUESTIONS
UK business loan comparison calculator questions
How do you compare two business loan offers?
Compare the total cost of borrowing, the APR with fees and the monthly payment for each, using the same amount. In the example Offer C costs £9,750.00 against £11,829.18 for Offer A.
Is the lowest APR always the cheapest loan?
No. A shorter term can have a higher APR and still cost less in pounds. In the example Offer C has the highest APR, 9.55%, and the lowest total cost.
Does a lower monthly payment mean a cheaper loan?
Not usually. A longer term lowers the payment but adds interest. £50,000 at 9% over 84 months has a payment of £804.45 but costs £17,574.13.
Do arrangement fees affect the APR?
Yes. The APR includes the fees, so a loan with a lower rate and a high fee can have a higher APR than one with a higher rate. Offer B has the lowest rate, 6.5%, and a 3% fee, and its APR is 8.54%.
Can I compare a flat-rate offer with an APR offer?
Yes. Choose the rate type of each quote and the calculator converts every offer to a total cost and an APR. A flat 4.5% over 48 months, with a 1% fee and £250 of other fees, is an APR of 9.55%.
What happens if I change country?
The United States option opens the separate compare business loans calculator, in dollars, with origination fees and a nominal APR. Your inputs are reset rather than converted.