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What drives the cost
Three components make up the cost of most business loans: the interest rate (or factor rate for short-term products), any fees charged by the lender, and the loan term. A longer term lowers the monthly payment but increases total interest paid. A shorter term does the reverse.
For limited companies, lenders price risk based on trading history, revenue, balance sheet strength, and sector. A company with two years of filed accounts and consistent turnover will typically attract a lower cost than one still in its first year.
Interest rate vs factor rate
Term loans and revolving facilities usually quote an annual interest rate applied to the outstanding balance. Short-term working capital products — often called merchant cash advances or revenue-based facilities — use a factor rate, which is a flat multiplier applied to the amount drawn. These are different structures and the costs are not directly comparable without converting to a like-for-like basis.
See APR or factor rate — what's the difference? for a side-by-side explanation.
Fees to factor in
Beyond interest, lenders may charge an arrangement fee (typically a percentage of the facility), a documentation or legal fee, and in some cases a monthly administration fee. Some lenders roll fees into the loan; others require payment up front or on drawdown.
For a full breakdown of what to look for, see What fees should I expect on a business loan?
Working out the total repayable
The clearest way to compare loan options is to request the total amount repayable — the sum of all scheduled payments including interest and fees — for each offer on identical drawdown amounts and terms. This removes ambiguity caused by differing rate structures.
If a lender cannot or will not provide a clear total repayable figure before you sign, treat that as a due-diligence flag. See How do I work out the total repayable? for the method.
Frequently asked questions
Do business loan costs vary by loan size?
Yes. Larger facilities often attract lower percentage fees and rates, partly because fixed administrative costs are spread across a bigger sum and partly because larger borrowers tend to present more documentation that reduces lender risk assessment uncertainty.
Is the cost the same for secured and unsecured business loans?
Generally not. Secured lending — where assets or a personal guarantee backs the facility — typically carries a lower rate because the lender's exposure is reduced. Unsecured lending prices in the additional risk, so rates and fees are usually higher.
Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.