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How they differ
A flat rate applies the interest percentage to the full amount borrowed for every year of the term, even though you are steadily repaying. A reducing-balance rate (like a normal APR) charges interest only on what you still owe, which falls each month. Because a flat rate ignores your repayments, a 6% flat rate is roughly equivalent to a 11–12% reducing-balance rate — nearly double.
What this means for your company
Flat rates make a loan look cheaper than it is. Always convert to a comparable figure before choosing — the true-cost calculator does it for you. Compare offers on total repayable, never on the headline rate. If a lender only quotes a flat or factor rate, ask for the total pounds you would repay.
What it means for you
Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.
Frequently asked questions
Why does a flat rate cost more?
Because it charges interest on the whole original sum for the full term, ignoring the fact you are paying it down. You end up paying interest on money you have already repaid, which roughly doubles the effective cost.
How do I compare a flat rate to an APR?
Convert both to total repayable in pounds, or use a true-cost calculator to express the flat rate as an equivalent APR. Never compare a flat rate directly against a reducing-balance rate — they are not the same scale.
Related reading
What is the difference between APR and a flat rate?
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A factor rate is a multiplier applied to the amount you borrow — a factor of 1.2 means you repay 120% of the…
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How do I work out the total repayable?
Total repayable is the sum of every payment you will make over the life of the facility — principal,…
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APR or factor rate — what's the difference?
APR expresses the annualised cost of credit including fees, while a factor rate is a flat multiplier applied…
Read →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.