CreditSquare Search
Menu

Compare the cost of two business loans

Put two term sheets side by side to compare net cash at drawdown, interest, fees, monthly payments and any principal due at maturity.

Facility A
Security, covenants and reporting
Facility B
Security, covenants and reporting

The illustration holds the selected annual rate constant, uses equal monthly periods and rounds each payment to the penny. Both fees are due at drawdown. Enter figures from your own term sheets.

How the comparison works

Both illustrations assume monthly payments in arrears and a constant rate. For an amortising loan, the payment before rounding is the principal multiplied by the monthly rate, divided by one minus the discount factor over the full term. At zero interest the principal is divided equally over the months. For interest-only borrowing, the opening principal stays outstanding until the last instalment.

The monthly rate is the annual percentage divided by 1,200. An arrangement fee based on the face amount and any other compulsory upfront fee are included once. If they are deducted, the amount paid into the business bank account falls. If the fees are paid separately, the lender advances the full amount but the borrower still pays cash on day one. “Cash available” reflects both cash flows.

A worked example

A company borrows £1 million for 12 months at 6% interest only, with a 1% fee taken from the advance. It receives £990,000. Interest costs £5,000 each month. The final payment is £1,005,000 including principal. Total financing cost is £70,000, made up of £60,000 interest and £10,000 in fees.

Amounts are rounded to the penny and the final payment clears the remaining principal. Rates in a base-plus-margin illustration stay at the entered level throughout. A lender's day-count convention, tax treatment, early-settlement charge, default fees or future rate changes may produce different cash flows. Compare the results with the actual contractual repayment schedules.

Take figures from your own proposals and capture the accompanying terms in the funding brief. See the refinancing guide for the effect of settlement costs.