How do origination fees change what a business loan costs?
Fees (commonly 1–5%) are deducted from the disbursement, but you repay the full loan amount. Borrow $100,000 with a 2% fee and you receive $98,000 while repaying interest on $100,000 — so the effective APR is higher than the stated rate. This calculator solves the true APR so offers with different fee structures compare honestly.
What do lenders look at for business loans?
Cash flow first: most want your debt-service coverage ratio (net operating income ÷ loan payments) above roughly 1.25. Also: time in business (2+ years preferred), credit score, collateral, and industry risk. Calculate your payment here, then check it against your monthly free cash flow before applying.
What terms are typical for business loans?
Bank term loans: 3–10 years at competitive rates. SBA loans: up to 10 years working capital, 25 years real estate, with capped rates but slower approval. Online lenders: faster but costlier, often 6 months–5 years. Equipment loans usually match the equipment life. Longer terms lower payments but raise lifetime interest — model both here.
Should I take a fixed or variable rate?
Fixed rates make cash flow planning simple and protect you if rates rise; variable rates start lower but add uncertainty. For thin-margin businesses, predictability usually wins. If you model a variable loan here, stress-test the payment at 2–3 percentage points above today's rate.
Why is the advertised rate not the same as the APR?
The interest rate covers interest alone; the APR folds in origination fees, arrangement charges and other mandatory costs, so it reflects what the borrowing actually costs. The gap can be wide on business lending, where fees are larger. Watch particularly for products quoted as a factor rate — common in merchant cash advances — where a figure like 1.4 means you repay 1.4 times the advance. That is not an interest rate, and because repayment is usually fast the equivalent APR is frequently far higher than it appears.
Will I have to give a personal guarantee?
For most small business borrowing, yes. A personal guarantee makes you personally liable if the business cannot repay, which sets aside much of the protection that operating through a limited company or corporation would otherwise give you. Some guarantees are capped at a share of the balance and some are unlimited, and the difference is worth negotiating before signing rather than after. Because a guarantee can put personal assets including your home at risk, it is worth having a solicitor read the wording.