What Does a £50,000 Business Loan Cost?

Start with the cash that reaches your account

A loan labelled £50,000 does not always put £50,000 in your bank account. If a lender deducts a 3% arrangement fee from the advance, the business receives £48,500 but still owes the £50,000 principal. If the fee is added to the loan, the business receives £50,000 and owes £51,500.

That difference disappears when offers are compared only by their headline rate. It reappears in the cash flow, where it is considerably less polite.

The table below holds the stated principal at £50,000 and the term at 60 months. It tests three illustrative nominal annual rates and three fee treatments. The rates are round sensitivity points, not collected offers, typical market rates or predictions about what a lender will offer you.

Download the nine-scenario results as CSV.

The full cost table

Each scenario uses monthly capital-and-interest repayments. “Monthly payment” is the regular payment for months 1 to 59; the final payment is adjusted by a few pence to clear the rounded balance. “Cost above net proceeds” is total repayment minus the cash the business actually receives.

The table deliberately separates interest from the fee. In the financed-fee rows, total interest includes the interest charged on the extra £1,500 balance. The total cash cost above net proceeds includes both interest and the fee.

A 3% fee can cost more than £1,500

At the 12% illustrative rate, deducting the £1,500 fee increases the cost above cash received from £16,733.40 to £18,233.40. The increase is exactly £1,500 because the fee reduces the proceeds without changing the balance or payment schedule.

Financing the same fee produces a different result. The lender advances £50,000 to the business but calculates repayments on £51,500. The regular monthly payment rises by £33.37, and total repayment increases by £2,001.95. That increase comprises the £1,500 fee plus £501.95 of interest charged on it over five years.

Neither treatment is automatically wrong. The problem is comparing them as though “3% fee” describes the whole effect. Ask where the fee goes, whether it attracts interest and how much cash lands in the account.

The rate still does most of the damage

With no fee, moving from the 8% scenario to the 16% scenario increases the regular payment from £1,013.82 to £1,215.90. Total repayment rises by £12,125.07.

That is why a low monthly payment deserves a closer look. It may reflect a lower rate, but it can also come from a longer term, an interest-only period or a balloon payment. This model changes only one feature at a time. A real quote can change several.

The British Business Bank says the rate offered can depend on the lender's assessment of the business, its credit position and any security, and that an offer may use a fixed or floating rate. Its business-loan guide also tells borrowers to check the term and early-repayment charges. A headline minimum rate is not a promise.

Nominal rate is not the same as APR

The model uses a nominal annual rate divided by 12. At 12%, the monthly rate is 1%. We then apply the standard amortising-loan formula:

Payment = P × r ÷ (1 − (1 + r)⁻ⁿ)

Here, P is the amount financed, r is the monthly rate and n is 60 monthly payments.

This calculation does not produce a regulated or lender-disclosed APR. APR calculations account for the timing of relevant charges and can make offers with different fee structures easier to compare. The British Business Bank's guide to business-loan types specifically advises checking APR because it incorporates lender fees.

Do not relabel the nominal rates in this table as APRs. If a lender gives you an APR, compare that figure as disclosed, then check the actual cash flows as well.

How the calculation works

We calculate interest monthly on the outstanding balance. Payments are rounded to the nearest penny using conventional half-up rounding. The last payment is adjusted to settle the remaining balance after 59 rounded payments.

The three fee treatments are:

• No fee: £50,000 reaches the business and £50,000 is financed.
• 3% deducted: the £1,500 fee comes out of the advance, so £48,500 reaches the business and £50,000 is financed.
• 3% financed: £50,000 reaches the business, but the £1,500 fee is added to the balance, so £51,500 is financed.

The scenarios assume a fixed rate, no payment holidays, no late fees, no early repayment, no balloon, no interest-only period and no other legal, valuation, brokerage or security costs. Tax treatment is outside the model. The British Business Bank notes that secured lending may also involve valuation and legal costs, so a real secured-loan comparison needs more than the arrangement fee shown here.

You can change the principal, rate, term and fee in the business loan calculator. Its output remains an illustration, not a credit offer.

How to compare two real offers

Put both offers into the same cash-flow frame. Collect these figures from the lender's documents:

1. Cash paid to your business.
2. Principal or amount financed.
3. Fixed or variable interest rate, and the disclosed APR where available.
4. Every arrangement, valuation, legal, brokerage and account fee.
5. Regular payment, number of payments and any different final payment.
6. Total amount repayable.
7. Early-repayment charges, late-payment charges and default terms.
8. Security and personal-guarantee requirements.

Then run the numbers using the same repayment term. If one offer provides less usable cash, do not pretend the principal labels make it like-for-like. If one rate is variable, test what happens when it rises rather than comparing its starting payment with a fixed offer and calling the job done.

Cash timing matters too. Our analysis of UK late-payment costs shows how a delayed receipt can create a separate financing cost. Borrowing to bridge that gap may solve the timing problem, but the loan cost still needs to fit the margin on the work being funded.

Frequently asked questions

How much is a £50,000 business loan per month?

In this five-year model, the regular payment is £1,013.82 at 8%, £1,112.22 at 12% and £1,215.90 at 16%, before financed fees. Your payment depends on the actual rate, term, repayment structure and fees in the offer.

Does a 3% arrangement fee always cost £1,500?

The stated fee is £1,500 on £50,000. If it is deducted upfront, the direct reduction in proceeds is £1,500. If it is added to the balance, you may also pay interest on that £1,500; in the 12% five-year scenario, the total increase is £2,001.95.

Is the lowest monthly payment the cheapest loan?

No. A longer term can lower the payment while increasing total interest. Compare net proceeds, total repayment and all fees, then check whether the rate can change.

What should I do before accepting an offer?

Ask the lender for the complete payment schedule and total amount repayable. Confirm how each fee is paid, whether it attracts interest, what security or personal guarantee is required and what happens if you repay early or miss a payment.