Funding Comparison

When comparing offers, capture the following for each: lender and product name, facility amount, term (months/years), interest basis (fixed, variable, base rate + margin), headline rate (%), APR (where applicable), arrangement fees, broker fees, legal and valuation fees, exit/early repayment charges, monthly payment, total repayable, security required, personal guarantee required, covenants, conditions precedent, and speed to funding. Without all of these, you cannot make an informed comparison.

The headline or nominal interest rate alone does not show the total cost of borrowing. Two facilities with the same nominal rate can have very different total costs due to differences in fees (arrangement, broker, legal, valuation), exit charges, interest basis (flat vs reducing balance), compounding, and repayment structure. The APR — where it applies — provides a more standardised comparison, but even APR may not capture all costs (such as early repayment charges or ongoing covenant compliance costs). Always look at the total repayable figure, not just the rate.

How interest is calculated matters. Fixed rate means the rate stays the same for the term. Variable means it can change (typically linked to a base rate). Base rate + margin means the rate tracks a reference rate plus a fixed margin. Some lenders use flat rate (interest on the original amount for the full term) while others use reducing balance (interest on the outstanding balance). Flat rate makes a facility look cheaper than it is. Always check which basis is used and compare like-for-like.

Fees can significantly affect the total cost. Capture: arrangement fee (typically a percentage of the loan), broker fee (agree upfront), legal fees (both lender's and borrower's), valuation fee, and any booking or commitment fee. Also check for exit or early repayment charges — these can make it expensive to refinance or repay early. Some fees are added to the loan (increasing the balance) while others are paid upfront. Factor all fees into your total cost comparison.

The total amount you will repay over the life of the facility, including all interest and fees. This is the single most important figure for comparison — it shows the true cost of borrowing. Two facilities with the same loan amount and term but different rates, fees, or interest basis can have very different total repayable figures. Always compare total repayable, not just the monthly payment or headline rate.

What security does each lender require? A first legal charge over property? A debenture over company assets? Personal guarantees? The security requirement affects your risk — a facility that requires a personal guarantee over your home carries more personal risk than one that does not, even if the rate is lower. Factor in the security and guarantee requirements alongside the financial cost.

Lender covenants are ongoing obligations you must meet during the facility term — such as maintaining a minimum DSCR, maximum LTV, or financial reporting requirements. Breaching a covenant can trigger default even if you are making payments. Read the covenants carefully. Also check conditions precedent — these are conditions that must be satisfied before funds are released (e.g., providing accounts, obtaining insurance, satisfying legal due diligence).

How quickly can each lender fund? If you have a time-sensitive transaction (completion deadline, acquisition window), speed may be more important than a marginal rate difference. Also consider flexibility — can you make overpayments? Can you extend the term? Are there drawdown options? A slightly more expensive facility that offers more flexibility may be better value than a cheaper but rigid one.

Not everything is captured in numbers. Consider: the lender's reputation and track record with similar transactions, their communication and responsiveness, their understanding of your sector, the quality of their terms sheet and documentation, and any references from other borrowers. A lender who is difficult to deal with during the application may be difficult to deal with during the facility term. Use pros and cons alongside the numbers to make a balanced decision.

All figures must come from actual lender illustrations or terms. Do not use estimated or assumed figures for comparison — this can lead to misleading conclusions. Request written illustrations from each lender before comparing. FinanceMyCompany.co.uk is a credit broker, not a lender. Lender criteria, availability, pricing and terms vary and are subject to application, credit assessment, affordability, underwriting, valuation, security, documentation and legal work.