What does APR mean, and how is the cost of my loan shown?

APR stands for Annual Percentage Rate. It is the standardised cost measure used for regulated consumer credit — borrowing by individuals. Our lending is to limited companies for business purposes, which sits outside the consumer-credit regime, so an APR is not the figure we use. Instead we show the cost in the way that is clearest for a business decision.

What we show you

• the amount borrowed and the term;
• the total amount payable — every pound the company will repay;
• the total cost of the credit — the difference between what is borrowed and what is repaid;
• a simple annualised rate, so you can compare the cost against other business finance;
• the full repayment schedule.

All of these appear on your Key Information Sheet (KIS) and in the Business Loan Agreement before you sign, so the cost is never a surprise.

Why not an APR?

APR is designed to compare long-running consumer products such as mortgages and credit cards, where it works well. For short-term business borrowing it can mislead — annualising the cost of a facility that runs for a few weeks produces a very large percentage that overstates what the company actually pays. The total cost of credit and the simple rate give a truer picture of a short-term facility.

If anything is unclear

If you would like us to walk through exactly how the cost of your loan was worked out, please contact us — we would always rather explain than leave you guessing. For a fixed-rate loan the figures on your agreement hold for the life of the loan; if the terms are ever varied (for example a hardship variation that extends the term), we will reissue the relevant figures so the new total cost is clear before anything is agreed.