When you compare borrowing, the number you reach for is usually the APR. For a multi-year loan that is fine. For short-term borrowing it can badly mislead — so this guide shows a fairer way to compare, the way a careful business owner would.
Why APR distorts short-term credit
APR expresses cost as if you borrow for a whole year. Borrow for a few days or weeks and that annualisation makes a small actual cost look enormous. It is simply the wrong lens for credit you will hold briefly. Some products have no APR at all — a merchant cash advance, for example, is a fixed cost repaid from card takings — so they cannot even be lined up in an APR column. For a worked example of this on our own product, see what APR means on a short-term loan.
The two comparisons that actually help
- Total cost of credit, in pounds, for your real amount and term. Ask each lender: for exactly this amount, over exactly this long, what is everything I will pay on top of what I borrow? That single figure cuts through the noise.
- Cost per £100 borrowed, per 30 days. To line up products of different sizes, normalise to a common basis — what does £100 cost for 30 days? It is illustrative, not a quote, but it lets a small short loan and a large long one sit side by side honestly.
On a per-pound basis, a small short-term loan is usually more expensive than a large multi-year one. That is not a trick of the numbers — it is real, and a good lender says so. If you need more, or for longer, a mainstream SME lender is often cheaper. The right question is which product fits the need, then which is cheapest within that shape.
A checklist before you commit
- Get the total cost in pounds for your amount and term, not a "from" rate.
- Check whether there is a cost cap — at Credicorp the total cost is capped at 100% of what you borrow.
- Ask what happens if you pay early, and what happens if you fall behind.
- Check the protections, not just the price — see the decision guide.
You can model our figures for a specific amount and term on the calculator at credicorp.co.uk, and there is a sourced provider comparison in comparing providers: a neutral view. Business lending to a company is outside FCA consumer-credit regulation under Article 60B FSMA RAO 2001 and is not covered by the Financial Ombudsman Service or the FSCS.
See also: A simple framework for comparing business finance options, APR vs total cost: which number should you trust?, Asset finance vs a business loan: how to compare them.