Before you sign anything — find out if the revenue this loan generates will actually exceed what it costs you to borrow. See ROI, breakeven month, cashflow and risk scenarios.
| Month | Revenue | Op. Costs | Gross Profit | EMI | Net After Loan | Cumulative Profit |
|---|
💡 Business loan interest is typically tax-deductible as a business expense in the UK, reducing the effective cost. Equity funding costs nothing monthly but dilutes your ownership of all future profits permanently.
In the UK, interest on business loans is generally tax-deductible as a business expense (check with your accountant for your specific situation). This means a 7.5% loan effectively costs you 5.6% after tax at the 25% corporation tax rate — significantly improving your effective ROI. Our calculator applies this automatically.
Your breakeven month is when cumulative net profit from the loan-funded activity equals the total cost of the loan. If your loan term is 36 months and you break even at month 8, you have 28 months of pure profit. If you break even at month 35, the loan barely pays for itself — and any revenue shortfall puts you underwater.
A business loan makes poor financial sense when: (1) the revenue generated is speculative with no historical basis, (2) the purpose is to fund operating losses rather than growth, (3) the interest cost exceeds projected profit margins, (4) a cash flow crisis might prevent repayment before the investment produces returns. Our pessimistic scenario tests exactly this.
Options include: high street bank loans (lowest rates, 5–10% APR, hardest to qualify), challenger bank loans (Funding Circle, Iwoca — faster, 8–20% APR), government-backed Start Up Loans (6% fixed, up to £25,000), and asset finance for equipment purchases (often better than unsecured loans for capital assets).
The core question is: will the return on investment exceed the cost of the loan? If yes, borrowing is financially rational. If no, you're destroying value — regardless of whether the bank will lend to you. Our tool answers this precisely.
In the UK, interest on business loans is generally tax-deductible as a business expense. This means a 7.5% loan effectively costs you around 5.6% after tax at the 25% corporation tax rate — significantly improving your effective ROI.