Business Loan Repayment Calculator for UK Companies: What Do You Owe?
Author: Russell SmithOctober 10, 2019
Updated for October 2019
Discover whether or not you have the budget for a new business loan with our business loan repayment calculator. Visualise the costs of borrowing and understand the true cost of your investment.
When it comes to securing funding for your business, the business loan is a tried-and-tested formula for success. But what so many fail to do is properly consider repayments. It’s important only to take out a business loan if you know you can repay it. This doesn’t just include the lump sum you borrowed. As all well know, a £10,000 loan will not cost you £10,000. It will cost you the full loan amount plus any interest and additional fees.
We are not trying to dissuade you from taking out a loan — far from it. At RS Accountancy, our online accountants understand just how beneficial the right loan can be. But, it does have to be the right loan. To make sure you aren’t borrowing more than you can realistically pay back, use our business loan repayment calculator below to check if you’re able to afford a business loan. Track your annual costs, monthly repayments and more.
Business Loan Repayment Calculator
Disclaimer: there may be additional costs associated with your business loan not included in the business loan repayment calculator above. While we make every effort to ensure that our business loan repayment calculator is accurate, you should double-check the numbers against another trusted source. Our business loan repayment calculator is not intended to replace the advice of a qualified financial advisor.
Want help figuring out the numbers and getting a better sense of what kind of business loan you can afford? Get in touch with our expert accountants today and arrange a free consultation to assess your business.
Business Finance: Where Can You Get a Business Loan?
There are various places to get a business loan if you want one. For small businesses, the most common place to secure a UK business loan is from a bank, especially for larger loans. You can either take out a specific type of business loan or acquire a credit card as a pseudo-business loan.
Keep in mind that while a credit card can work in a similar way to business loans in terms of monthly payments, they can be considered a personal loan. So the use of a credit card for your business can affect your credit score if cash flow becomes a problem. That’s why our business loan repayment calculator can be so useful. It can help you protect your credit history by ensuring you don’t borrow too much.
You do have other funding options, though. Peer-to-peer lending is another popular method of asset financing, with websites available to secure investors. You can also, of course, get business loans from other types of traditional investors and even friends and family. The term of the loan from these types of people is often unique, so it’s always important to fully understand repayment terms before agreeing to long-term loans.
You can also find lending options through the government.
It’s always best to check the various costs associated with business loans, as some places offer much better rates than others. While a credit card might seem like the easiest solution, you may find your industry is much more suited to private investor loans.
Are Business Loan Repayments & Interest Rates Tax Deductible?
One thing that can make or break a business loan is the potential tax benefits. The interest rates displayed on our business loan repayment calculator may seem to make a loan unaffordable. However, could tax deductions help you secure the money you need?
The answer is often, yes.
In most cases, when you repay a business loan, you are paying off two parts: the principal (amount originally borrowed) and the interest. The part of your repayment that goes towards paying off the principal is not tax-deductible. However, the part of your monthly repayment that goes towards paying off interest is tax-deductible.
Why is that? Because the interest rate, as shown on our business loan repayment calculator, is considered a business expense. It is required for you to obtain the resources you need, and therefore, is deductible.
Let’s take a look at an example. Let’s say your monthly business loan repayments are £1,000. Of this amount, £800 goes towards paying off the principal and £200 goes towards interest repayments. The £200 is tax-deductible, but the £800 is not.
What Is an Unsecured Business Loan?
If you’re looking to get a business loan, one of the first things you’ll notice is they come in two distinct categories: secured and unsecured. A secured loan is one that’s backed up by collateral. Typically, you will borrow money from a lender and use property, such as your home, as collateral.
The advantage of a secured loan is you’ll typically be able to borrow a more substantial amount at a smaller cost and over a longer period. You’ll notice on our business loan repayment calculator that the total repayment is lower for these kinds of loans. The disadvantages of a secured loan is it is usually slow to process. You may also lose your collateral (property) if you cannot make your repayments. With this in mind, you must speak to a qualified financial adviser before taking out a secured loan.
When you punch the numbers into our business loan repayment calculator for an unsecured loan, you’ll see much higher fees than for the same amount as a secured loan. This is because an unsecured loan, as you might have guessed, is a loan that is not backed up by collateral. Unsecured loans tend to be more expensive and for smaller amounts, as the lender is taking on more risk when they give you the loan. On the plus side, it’s usually quicker to get an unsecured loan. Also, you won’t necessarily lose any property if you cannot make your repayments.
Used our business loan repayment calculator but still unsure whether or not a business loan is right for you? Our accountants in Leeds offer a free, no-obligation consultancy service and we can help you understand your options.
Russell Smith is an award-winning accountant and founder of RS Accountancy. With over a decade of experience running his company, he has worked with countless small businesses just like yours, helping them grow profits and manage their finances. Russell is also a prolific financial writer, having contributed to such publications as The Guardian, The Telegraph and The Daily Mail.