In the United Kingdom, financial institutions that lend money for business or commercial purposes are not mandated by law to disclose their annual interest rates. They are not even required to provide a benchmark rate for funding. This is because currently lending for business purposes is not regulated. For this reason, many small to medium scale enterprises or SMEs end up biting off more than they can chew when it comes to loans and therefore SMEs which do not have the deep pockets of large companies are not getting the best value for their money.
Loan term (years)
Why Use A Business Loan Calculator
We value the contributions of the SMEs to the UK’s economy and instead of capitalising on their need for business funding, our position is to help them gain every possible advantage in securing the best lending arrangement to cover their financial needs and ultimately reach their business goals.
In our opinion, lenders present their lending packages from a marketing standpoint and not a business standpoint. The message often presents a rosy picture of what the loan can do but not how much the cost of the loan will impact on the business’ cash flow. The business should have the full knowledge of how much they will be paying before agreeing to the terms of the loan.
We created the Business Loan Calculator to give SMEs a tool they can use to compare loans by applying various interest rates. Our business loan calculator will help SMEs to understand the actual cost of what they will be paying for should they require funding. By using our business loan calculator, the SME will gain better clarity on the loan offer and arrive at a numbers-based decision on which package to accept.
How Is The EMI Calculated
The Business Loan Calculator uses an algorithm that turns an offer for a business loan into a wider range of rates. A business owner will be able to compare various rates and see which ones are the most advantageous. When using the Business Loan Calculator, here are a few things that you need to keep in mind:
- The numbers that are presented by the Business Loan Calculator are only cost estimates of a business loan quote. It does not take into consideration any criteria that are used by the lender to determine who can borrow money.
- The numbers are calculated based on the data provided by the user.
- Please keep in mind that the Business Loan Calculator will not determine whether you qualify for a loan or not. You will still have to comply with the criteria provided by the lender.
- The figures presented as payments every month are based on the idea that the amounts paid out will remain the same at the end of every month.
- The figures presented have already factored in other fees that you have to pay every month.
- The Business Loan Calculator assumes that the rates will remain the same for the duration of the entire term of the loan.
The Business Loan Calculator functions as a guide. When making a decision on financial matters, you may wish to consult with a professional or experienced financial manager.
Definition Of Terms For Loan Rates
Here are popularly-used terms when discussing business loan rates. We’ve taken the time to present their respective definitions so that you can fully understand the loan proposal and make the best decision for your business.
Annual Interest Rate
The actual cost of funding the loan over the length of its term presented as a percentage. The annual interest can worked out by simply multiplying the rate charged on the loan per month with the total number of payments made within a year.
The total amount of interest paid within a year that is presented as a percentage of the amount of the loan. You can arrive at the number by simply dividing the amount of interest paid in a year by the total amount funded.
The cost of the loan. The Factor Rate is commonly identified with merchant cash advances, a process which offers funds to businesses in exchange for a percentage of the credit card income accumulated on a daily basis. It is not presented as a percentage but as a decimal that usually ranges from 1.1 to 1.5.