Loan details
£
%
years
£
Monthly repayment
£0
—
—Total repaid
—Total interest
—Total cost (inc fees)
—Annual repayment
For guidance only — not financial, tax or legal advice. Verify with a qualified professional.
Business loans — frequently asked questions
How are business loan repayments calculated?
Most business loans use the standard annuity formula: M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the principal, r is the monthly interest rate (APR ÷ 12), and n is the total number of monthly payments. This gives you equal monthly payments over the loan term — early payments are mostly interest, while later payments are mostly principal.
What interest rate can I expect on a business loan in 2026?
Business loan rates in 2026 typically range from 4–12% APR depending on the lender, your business history, and whether the loan is secured. High street banks tend to offer 5–8% for established businesses with good credit. Alternative lenders and fintechs may charge 8–15% but offer faster decisions. Start-up loans backed by the government offer 6% fixed rate.
Should I choose a shorter or longer loan term?
Shorter terms mean higher monthly payments but much less total interest. A £50,000 loan at 7% costs £9,900 in interest over 3 years vs £18,580 over 5 years. Choose the shortest term your cash flow can comfortably support. If in doubt, pick a longer term with a flexible overpayment option — you get the safety of lower payments with the ability to pay down faster.
Is business loan interest tax-deductible?
Yes. Interest on business loans is a tax-deductible expense for both sole traders and limited companies. This means the effective cost of the loan is lower than the headline rate — a 7% loan effectively costs 5.67% for a basic rate taxpayer (or 4.2% if you pay higher rate tax). The principal repayment is not deductible, only the interest portion. Arrangement fees are also deductible.