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How to work out your repayments on a Commercial Loan - Factors to Consider


Commercial Loans can be a great opportuntity for your business. There may be many reasons to seek access to commercial finance – to improve cash flow, to purchase equipment, to purchase inventory or to purchase commercial property. These are just a couple of reasons you may want to take your a commercial loan.


It’s important when you take out a commercial loan to understand how repayments work. Lenders don’t just give out money for good will – they have to make a profit too. They lend money on the proviso that you will repay it – and repay it with interest.


How does a Commercial Loan work?

When you take out a commercial loan, you have to pay back the money you borrow over an agreed period of time – usually in equal repayments at fixed intervals. You also make interest repayments. The interest rate (the amount you pay above the fixed amount that you have borrowed) is how Lenders make their money.   With this in mind, you can think about the regular repayments that you make on a loan like this – with each repayment you’re paying off a little bit of the money you borrowed, and an interest payment to cover part of the loan as well. (Some lenders will have other fees on their loans as well.)  

How do you work out your monthly repayments?

There are a number of factors that impact your monthly repayment on a commercial loan. You really need to consider all of these things before you decide on a Lender. You should compare many different lenders and loan products before choosing the product that best suits your individual needs

How much you have borrowed – Obviously the amount you want to borrow for a commercial loan is the biggest impact on what your monthly repayments will be. Before borrowing money you should know whether you can afford to pay it back. 

How long the loan is for – The length of time you take out a loan for, oftentimes referred to as the “loan term” has an impact on what your repayments will be. For example, if you take out your commercial loan over a shorter time period, your monthly repayments will be higher but you may end up saving money as you end up paying less interest. If you take out a loan over a longer period of time, your loan repayments will be lower but it may end up costing you more in the long term as your interest payments will be higher.

How often you are making repayments – Lenders often let you choose from different loan repayment options. Some lenders let you choose from monthly, fortnightly or weekly repayments. If you can afford to make repayments more often than monthly, you will end up paying less interest in the long run as your loans will be impacted by the effect of compounding (your interest is charged on the principal loan amount left to repay so if you are chipping away at this more regularly you will be charged less interest.)

What interest rate you are being charged – Obviously, the interest rate that you are charged impacts how much your commercial loan repayments will be and the interest rate charged is often the most important factor when choosing a lender.

If your chosen lender has any other fees that they are charging you – Different lenders may also charge you other fees over the life of a loan and these will be all factored into your regular repayments. Don’t forget to take these into accounts when calculating repayments and assessing chosen lenders.

As you can see, there are a number of factors that you need to consider when calculating repayments on your commercial loan. If you would like help, get in touch to speak with one of our experts today. 

Now that you’ve calculated, let’s get started.

  1. Get in touch and tell us a bit more about your commercial loan needs
  2. We will present you with options from different lenders
  3. We’ll submit all of your application paperwork and liaise with the lender on your behalf.
No obligation. Get in touch with our team at Commercial Experts today, fill in the form on the right or call 0478 538 537.