Business Loan Repayment Calculator

Amortising loans cost less than they look.

Written and maintained by Mohit PatelLast checked August 4, 2026How we build these

Currency

Loan amount

Annual interest rate

Term

months

Arrangement fee

Monthly repayment

$2,009.85

$18,073 of total cost

Total repaid$96,473

Interest$16,473

Arrangement fee$1,600

Total cost of borrowing$18,073

An amortising loan repays principal from the first payment, so the average balance is roughly half the principal: which is why the interest is far below the headline rate times the amount times the years.

How the Business Loan Repayment Calculator works

An amortising loan repays principal from the first payment, so the average balance is roughly half the amount borrowed. That is why total interest is far below the headline rate times the amount times the years.

Also known as: commercial loan repayment · business borrowing cost · loan repayment schedule

The amortisation underneath the payment

A standard business loan repays on an amortising schedule: equal payments, each split between interest on the outstanding balance and principal that reduces it. Early payments are mostly interest, later ones mostly principal.

The consequence people find surprising is how slowly the balance falls at first. On a five-year loan, roughly a third of the principal is still outstanding at the halfway point on typical rates.

Which matters for early repayment decisions and for understanding what a loan actually costs. Total interest paid over the term is frequently 15% to 30% of the amount borrowed on a business loan at commercial rates, and it is worth seeing that figure before signing rather than inferring it from the monthly payment.

Reading the true rate

Business lending is quoted in several ways and they are not comparable. An annual percentage rate on a reducing balance is the standard and the most honest. A flat rate applied to the original amount for the whole term is roughly double the equivalent APR, because you pay interest on money you have already repaid.

A £50,000 loan at 6% flat over three years costs £9,000 in interest. The same money at 6% APR on a reducing balance costs around £4,750. Same headline number, nearly double the cost.

Then the fees: arrangement, documentation, broker commission, and early repayment charges. On short-term facilities the fees frequently exceed the interest, which is why total cost of credit is the only comparison worth making and why lenders quoting monthly rates should be asked for it explicitly.

Personal guarantees, and what they mean

Most small business lending in the UK requires a personal guarantee from the directors, which makes the debt personally recoverable if the company cannot pay. That removes the protection that limited liability otherwise provides.

The scope varies and is worth reading. Some guarantees are capped; many are not. Some cover only the principal; others include interest, costs and enforcement expenses. Joint and several liability between multiple directors means each is liable for the whole amount rather than a share.

Personal guarantee insurance exists and covers a proportion of the exposure for an annual premium. Whether it is worth it depends on the size of the guarantee against personal assets, and it is a calculation more directors should do before signing rather than after the business runs into difficulty.

Whether the borrowing pays

The test is whether the return on the borrowed money exceeds its cost, with enough margin to justify the risk and the fixed obligation.

For inventory, that means the gross margin on the funded stock over the holding period against the interest over the same period. Stock turning four times a year at a 35% gross margin against 12% annual interest is comfortably positive. The same stock turning once a year is marginal.

The fixed obligation is the part that gets underweighted. A loan payment is due whether the month was good or bad, and it converts a variable cost structure into a partly fixed one. That reduces the margin of safety, and businesses that borrow to fund growth in a volatile category are taking two risks rather than one.

Early repayment, and when it is worth it

On a reducing balance loan, early repayment saves the interest that would have accrued on the repaid principal for the remaining term, which can be substantial on a long loan repaid early.

The offsets are early repayment charges, which many business loans carry, and the loss of the cash. Repaying a loan at 11% is a guaranteed 11% return, which is excellent, unless the cash was the buffer that keeps the business solvent in a bad quarter.

The order of priority in most small businesses is: keep the reserve, take any early payment discounts from suppliers, then repay the most expensive debt. Merchant cash advances and short-term facilities at effective rates above 30% should be cleared before any term loan at commercial rates, and frequently are not because the term loan feels more like real debt.

Where to go next

The Business Loan Repayment question rarely arrives on its own. These are the ones that usually come with it:

Line of Credit Cost Calculator — Fees on the facility, interest on the balance.
Merchant Cash Advance Cost Calculator — A factor rate is not an interest rate.
Business ROI Calculator — Annualised, and with a present value beside it.
Etsy Fee Calculator — Every Etsy fee on one sale, itemised.

Not financial advice. Marketplace fees change, and they vary by country, plan and seller status. Every rate here is an editable default, not a quoted price, check the platform's current fee schedule before you price a product against it. This is not tax or business advice.

Frequently asked questions

How is a loan repayment calculated?

The standard amortisation formula spreads principal and interest evenly across the term. Early payments are mostly interest; later ones mostly principal.

Why is total interest lower than I expect?

Because you are not borrowing the full amount for the full term. The balance falls with every payment, and interest is charged on the balance.

Should I take a longer term?

It lowers the monthly payment and raises total interest. For working capital, matching the term to how long the money is actually needed is better than minimising the payment.