Business loan calculator: a loan, hire purchase or lease, side by side

Our team are finance brokers in Scotland. We help businesses across the whole UK. We made this tool so you can try your own numbers first, for free.

Flat rate, interest rate, APR or factor rate?

Flat rate, interest rate, APR and factor rate are four ways to say what the money costs. The tool shows all four, so you can compare like with like.

• A flat rate is worked on the amount you first borrow, for each year.
• An interest rate is worked on what you still owe. So for the same finance, it is a bigger number.
• An APR is the yearly cost with the fees counted in.
• A factor rate is what you pay back for each £1 you borrow.

We never suggest a rate. The lender sets it, once it has looked at your business.

Loan, hire purchase or finance lease?

A business loan

The lender lends your business money. You pay it back each month, with interest. We arrange business loans from 3 months up to 10 years.

Hire purchase

The lender buys the van, digger or machine. Your business pays for it each month. After the last payment and a small fee, it is yours.

Finance lease

You use it without owning it. VAT is added to each payment. At the end, there is usually a small yearly rental.

We arrange asset finance from 12 months up to 7 years. Most runs 2 to 5 years.

How does VAT work?

There are three ways to pay the VAT on what you buy.

• At the start. On hire purchase, you pay the VAT up front.
• Later. Some lenders let you put the VAT off. They collect it in month 3, after you claim it back on your VAT return.
• Each month. On a finance lease, VAT is added to each payment.

Do I need a deposit?

You do not always need a deposit. Finance with no deposit is possible, and quite common. But most lenders still look for 5 to 10%.

What is a balloon payment?

A balloon is a bigger last payment. It makes each monthly payment lower. But what you owe comes down more slowly, so you pay more interest.

At the end, you pay it, take new finance to clear it, or sell the asset.

What fees do lenders charge?

Each lender sets its own fees. As a guide:

• A fee to set up the agreement is about £100 to £500. It is often paid with the first payment.
• On hire purchase, a fee to own it at the end is about £100 to £300.
• Some lenders charge about £30 to £50 a year.

What should I ask my accountant?

We are not tax advisers. Take these questions to your accountant:

• Can we claim capital allowances on this? GOV.UK explains capital allowances.
• Can we claim back the VAT?
• Which suits our tax best: a loan, hire purchase or a finance lease?

Frequently asked questions