Business loan calculator UK

What is a business loan?

A business loan is a way of borrowing money from a lender that can then be used to fund start-up costs or help your business to grow.

A business loan works in the same way as any other loan – you borrow a fixed lump sum and then repay it, plus interest, over a set number of years (known as the “term”). Depending on the type of loan you take out, your interest rate will be fixed or variable.

Types of business loans

There are 2 main types of business loans: unsecured and secured.

Unsecured business loans allow you to borrow funds without needing to secure them against any business assets such as property or equipment. The amount you can borrow and the interest rate charged will depend on the creditworthiness of you and your business. The better your credit rating, the more you’re likely to be able to borrow and the more competitive the interest rate will be.

Secured business loans require you to use an asset from your balance sheet as security, usually property. It may even be possible to use your own home as security, but remember that if you are unable to keep up with your loan repayments, your home will be at risk.

Because lenders have this added security, you will usually be able to borrow a larger amount of money with a secured loan compared to an unsecured loan. Interest rates may be lower too.

How to apply for a business loan

You can usually apply for your chosen business loan online. You will typically need to provide details such as your business turnover in the past 12 months, your projected turnover for the next 12 months, your net profit, the date your business started trading and your address history for the past 3 years.

You may also need to provide details of any existing personal loans, overdrafts, mortgages or credit card repayments as well as any existing business loans or overdraft repayments. In addition, you will usually need to provide proof of ID and address.

Once you’ve made your application, the provider will run a credit check to assess your creditworthiness and whether they are willing to lend to you.

Frequently asked questions

• How do I calculate how much money I need?

  To do this, you’ll need to consider exactly what you want to use the funds for. Do you want to pay for new equipment, for example, or are you planning to carry out essential improvements to your business?

  Your next step is to consider how much you can actually afford to borrow. Use the above calculator to work out how much your desired loan amount will cost you each month to see whether it’s realistically manageable. If it’s not, you’ll need to reduce the amount you borrow. Keep in mind that borrowing over a longer term will reduce your monthly repayments but it will also mean you’ll end up paying more interest overall.

• How do I calculate the cost of a business loan?

  You can use our business loan calculator to work out how much a business loan might cost. Simply enter the loan amount, term and interest rate to see how much it will cost you in total over the length of the loan.