Business Loan Calculator for UK Trades
Calculate monthly loan repayments, total interest, and compare financing options for vans, equipment, and business cash flow. Free loan calculator for UK plumbers, electricians, and trade businesses.
Loan Details
How much do you need to borrow?
Typical: 6-10% (secured), 10-15% (unsecured)
How long to repay? (1-7 years typical)
Common Loan Scenarios:
Affordability Check
What you typically turn over per month
Loan Summary
Monthly Repayment
£406
Fixed for 60 months
Total Cost of Borrowing
✓ Looks Affordable
Payment is 4.1% of your monthly revenue
Below the 10% guideline. Should be manageable if revenue stays consistent.
Compare Loan Terms
Annual Cost
📊 10% Rule
Loan repayments should be less than 10% of your monthly revenue. Above that, you risk cash flow problems in slow months.
🚗 Match Term to Asset
Van loans: 5-7 years. Equipment: 2-4 years. Don't pay for things longer than they'll last.
💰 Emergency Fund First
Keep 3 months expenses in reserve before taking on debt. Loans are risky without a cash buffer.
Business Loans for UK Trades: Complete Guide
Need to finance a new van, tools, or bridge a cash flow gap? Business loans help trade businesses grow without draining cash reserves. But loans cost money—interest rates mean you pay back more than you borrow. This calculator shows you the true cost of borrowing.
How Business Loan Repayments Work
Most business loans use fixed monthly repayments. You borrow a lump sum and repay it over 1-7 years in equal monthly instalments. Each payment includes:
- Principal: Part of the original amount you borrowed
- Interest: The cost of borrowing (typically 5-15% APR for trades)
In the early months, most of your payment goes towards interest. Later, more goes towards principal. This is called "amortization."
Example: £20,000 Van Loan
Let's say you're buying a new van and need to borrow £20,000 at 8% APR over 5 years:
That's £4,330 in interest over 5 years. Not cheap, but if the van generates more income than £405/month, it pays for itself.
Typical Interest Rates for Trade Businesses (2025)
- 5-8% APR:Established businesses (2+ years trading), good credit, secured loans (asset-backed)
- 8-12% APR:Newer businesses (6-24 months), average credit, unsecured loans
- 12-20% APR:Startups (under 6 months), poor credit, merchant cash advances, invoice financing
- 20-50%+ APR:High-risk lenders, payday-style business loans (avoid these!)
The better your credit and trading history, the lower your rate. Secured loans (where you use the asset as collateral) typically have lower rates than unsecured loans.
Short-Term vs Long-Term Loans
Should you borrow over 1 year or 7 years? Here's the trade-off:
Short-Term Loans (1-3 years)
- • Lower total interest paid
- • Get debt-free faster
- • Better for equipment/tools
- • Higher monthly payments
Long-Term Loans (4-7 years)
- • Lower monthly payments
- • Easier cash flow management
- • Better for vans/property
- • Higher total interest paid
Same £20,000 Loan, Different Terms:
Shorter terms = higher monthly payments but less interest. Longer terms = lower payments but more interest. Choose based on your cash flow and what you're financing.
What Trade Businesses Borrow For
🚐 Vans & Vehicles (£10k-£40k)
Most common use. Typical: 5-7 year loan at 6-10% APR. Van should last longer than the loan term.
Monthly cost for £25k van over 5 years @ 8%: £507/month
🔧 Tools & Equipment (£5k-£15k)
Shorter terms (2-4 years) make sense. Equipment depreciates fast—don't still be paying when it's worn out.
Monthly cost for £10k equipment over 3 years @ 9%: £318/month
💰 Cash Flow Bridging (£5k-£30k)
Short-term (6-18 months) to cover slow months or unpaid invoices. Higher rates (10-15%) but quick approval.
Monthly cost for £15k over 1 year @ 12%: £1,336/month
📈 Growth & Expansion (£20k-£100k)
Hiring staff, opening second location, large stock purchases. Medium-term (3-5 years). Need solid financials.
Monthly cost for £50k over 5 years @ 7%: £990/month
Can You Afford the Loan?
Before borrowing, ask: "Can I comfortably cover this monthly payment?"
Affordability Test:
- Monthly payment should be less than 10% of revenue: If you turn over £10k/month, don't borrow more than £1k/month in repayments.
- Can you afford it in a slow month? If work drops 30%, can you still pay? Use your worst month as a benchmark.
- Does the asset generate income? A new van should bring in more work. Equipment should increase efficiency. Cash flow loans should unblock revenue.
- Emergency fund intact? Don't borrow if you have no cash buffer. Keep 3 months expenses in reserve.
If you fail any of these tests, the loan is too risky. Either reduce the amount, extend the term to lower payments, or wait until your business is stronger.
Secured vs Unsecured Loans
🔒 Secured Loans
You use an asset (van, property, equipment) as collateral. If you don't repay, the lender can seize it.
Pros: Lower rates (5-10%), larger amounts, longer terms
Cons: Risk losing the asset, slower approval, more paperwork
🔓 Unsecured Loans
No collateral required. Lender relies on your credit score and trading history.
Pros: Quick approval, no asset risk, less paperwork
Cons: Higher rates (10-20%), smaller amounts, shorter terms
General rule: Use secured loans for vans/property (big purchases, long terms). Use unsecured loans for equipment/cash flow (smaller amounts, short terms).
Where to Get Business Loans for Trades
🏦 High Street Banks (HSBC, Barclays, Lloyds, NatWest)
Best for: Established businesses (2+ years), larger loans (£25k+), lower rates (5-8%)
Slow approval (4-8 weeks), lots of paperwork, strict credit requirements. But cheapest rates if you qualify.
🚀 Online Lenders (Funding Circle, iwoca, Fleximize)
Best for: Faster approval (1-5 days), newer businesses (6+ months), mid-range amounts (£5k-£50k)
Higher rates (8-15%) than banks, but much faster. Good for time-sensitive opportunities (new van available now).
🚗 Asset Finance (Close Brothers, Aldermore, Investec)
Best for: Vans, vehicles, machinery (asset is collateral), 5-7 year terms
Competitive rates (6-10%) because asset secures the loan. Van ownership transfers after final payment.
💳 Government-Backed Loans (British Business Bank, Recovery Loan Scheme)
Best for: Startups, poor credit, borrowers who can't get traditional loans
Government guarantees part of the loan, so lenders take less risk. Check gov.uk for current schemes.
Alternatives to Business Loans
Loans aren't the only way to finance growth. Consider these alternatives:
- Hire Purchase (HP): Buy a van/equipment in instalments. You own it after final payment. Similar to a loan but tied to the specific asset.
- Lease (Operating Lease): Rent a van/equipment monthly. Never own it, but lower monthly cost. Good for newer vehicles you'll replace every 3-5 years.
- Invoice Financing: Borrow against unpaid invoices (up to 90% of value). Good for cash flow gaps. Rates: 1-3% monthly.
- Overdraft: Flexible borrowing on your business current account. Rates: 10-20%. Good for short-term cash flow, bad for long-term financing.
- Retained Earnings: Save profits over time. No interest, no debt. Slower but safest option.
Common Loan Mistakes to Avoid
❌ Borrowing for Living Expenses
Business loans should fund income-generating assets (van, tools) or growth. Don't borrow to pay yourself—fix profitability first.
❌ Ignoring Total Interest Cost
A £20k loan at 12% over 5 years costs £26,680 total—you pay £6,680 in interest. Always check total repayment amount.
❌ Choosing Longest Term to Lower Payments
7-year loan = lower payments but MUCH more interest. Only choose long terms if you genuinely need lower monthly cost.
❌ No Emergency Fund Before Borrowing
If you have no cash buffer and borrow, one slow month could wreck you. Keep 3 months expenses in reserve BEFORE taking loans.
Early Repayment: Should You Pay Off Loans Early?
Many business loans allow early repayment (overpaying or settling early). Should you?
Pay Off Early If:
- • High interest rate (12%+)
- • No early repayment fees
- • You have cash reserves intact
- • Loan stresses your cash flow
Keep Paying Normally If:
- • Low interest rate (6-8%)
- • Early repayment penalties apply
- • Cash better used for growth
- • Payments are comfortable
General rule: If your loan rate is higher than what you'd earn investing the cash (or higher than your profit margins), pay it off early. Otherwise, keep the cash for opportunities and emergencies.
Related Calculators
📈 Break-Even Calculator
Work out how many jobs you need to cover loan repayments and fixed costs
🛡️ Emergency Fund Calculator
Calculate cash reserves needed before taking on debt
🚐 Van Running Cost Calculator
Calculate total van costs including loan repayments and running costs
📊 Profit Margin Calculator
Ensure your margins can absorb loan repayments and still make profit
💡 Pro Tip
Get quotes from 3-5 lenders before committing. Rates vary hugely—a 2% difference on a £20k loan saves you over £1,000 in interest. Use comparison sites like Business Finance Compared or Funding Options to see multiple offers at once.
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