What is the cheapest interest rate I can get?
This is a question we often get asked. And we understand why. After all the interest rate is an important number if you are trying to evaluate whether a loan is the right one for your business. But (and it may sound stupid!) there is a danger of being too fixated on the interest rate!
There are many other factors to consider.
For example, what are the monthly payments? It might be great paying a lower rate, but if the monthly capital payments are too high, then the business might struggle to pay it back each month.
Some lenders charge an exit fee or early repayment charge. This means that the borrower will be liable to additional costs should they decide to repay the whole or part of the loan early. Therefore if a borrower might be aiming to do this they should consider these charges.
The speed of the loan is also important. There might be little point in waiting months for a loan at a lower rate if the funds are needed next week!
These are just some examples – but it is clear that a loan cannot always be simplified into just one number!