The Great Conspiracy: what is the real rate of interest on a short term loan?

When comparing offers of finance as a business owner, it is very difficult to understand the true cost of the product. Unlike consumer finance, there is no requirement to disclose comparable rates and few know how to calculate one.

This is not even widely understood by finance professionals and is a classic case of 'framing' - that is in the behavioural finance sense of the word rather than a detective story. Although sometimes it certainly feels like one!

If you are offered a loan of say $100,000 for 6 months with monthly repayments and you are told that the interest payable is $12,000, what interest rate do you think you are being charged?

Many people's first reaction is 12%.

Some realise that it is only for 6 months so double it to 24%.

The truth is that it is 49%.

The biggest problem for business owners is that they need permanent working capital, not an expensive short term sugar hit followed by negative cashflow.

That's why we love invoice trading - it's the smart way to grow. It solves your short and long term needs, all at a very reasonable, easy to understand cost and you decide when you need it. Take control.