How do I calculate the total cost of borrowing?

The short answer

How do I calculate the total cost of borrowing. The answer depends on your company's specific circumstances, but for most UK limited companies there are practical options available.

Understanding the key factors — what lenders look at, what it costs, and what the alternatives are — puts you in a stronger position to make the right decision for your business.

How it works in practice

For UK limited companies, the commercial lending market offers several options. Short-term loans (typically 7 to 84 days) suit one-off needs. Revolving credit facilities suit recurring or unpredictable needs. The right choice depends on the timing and purpose of the borrowing.

Credicorp lends to the company itself — not to the director personally. No personal guarantee is required, which means the director's personal assets are ring-fenced from the business borrowing.

Applications are assessed on the company's own trading performance, typically using bank statement data. Open banking connections can speed this up to minutes rather than days.

What to watch for

Compare the total cost of borrowing (total repayable amount) rather than just the headline rate. A loan with a lower daily rate but a longer term can end up costing more than a slightly higher rate over a shorter period.

Check whether there are arrangement fees, early repayment charges, or late payment fees. Reputable lenders are transparent about all costs upfront — if a lender is not, consider that a warning sign.

What this means for your company

Making an informed borrowing decision starts with understanding the cost, the alternatives, and the repayment timeline. The cheapest option is not always the best option — speed, flexibility and certainty of funding also matter when your business is on the line.

The practical step: get a quote, compare it against other options (including doing nothing), and make a decision based on the total cost and the impact on your business if you do not act.