Finance Calculator
Finance Cost Per Month Calculator
Calculate the effective monthly cost of any finance arrangement. Enter your facility amount, total fees, interest rate, and term to see a full breakdown of monthly outlay including fees spread over the facility period.
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What is Finance Cost Per Month?
Finance cost per month is the total monthly expense of servicing a finance facility, including interest, fees, and charges. Calculating this helps businesses understand the true cost of borrowing on a monthly basis.
How is the effective monthly cost calculated?
Understanding the true monthly cost of a finance facility requires looking beyond the headline interest rate. Many arrangements carry upfront fees - arrangement charges, legal costs, valuation fees - that significantly impact the total cost of borrowing.
This calculator combines the monthly interest cost with all one-off fees spread evenly across the facility term, giving you a single effective monthly cost figure. This makes it straightforward to compare different finance options on a like-for-like basis.
The formulas used in this calculator are:
Monthly Interest = Facility Amount × (Interest Rate / 100) / 12
Monthly Fee Spread = Total Fees & Charges / Facility Term
Effective Monthly Cost = Monthly Interest + Monthly Fee Spread
Total Finance Cost = (Monthly Interest × Term) + Total Fees
Cost as % of Facility = Total Finance Cost / Facility Amount × 100
Assumptions and caveats
- •This calculator assumes a simple interest structure. Compound interest or amortising loan schedules may produce different results.
- •All fees are spread evenly across the facility term. In practice, some fees may be payable upfront or at specific milestones.
- •The interest rate is assumed to remain fixed for the full term. Variable-rate facilities will produce different actual costs.
- •Early repayment charges, exit fees, and ongoing administration costs are not included unless entered in Total Fees.
- •Results are indicative only. Contact a finance specialist for a formal quotation.
Worked Example
Scenario
A business has a GBP 200,000 invoice finance facility with an annual discount rate of 4.2% and a monthly service fee of 0.3% on turnover of GBP 150,000.
Calculation
- Monthly Discount Cost = 200,000 x (4.2% / 12) = GBP 700
- Monthly Service Fee = 150,000 x 0.3% = GBP 450
- Total Monthly Finance Cost = 700 + 450 = GBP 1,150
What This Means
The total monthly cost of the facility is GBP 1,150, or GBP 13,800 per annum. As a percentage of turnover (GBP 1.8m annualised), the finance cost represents 0.77%. This is within the typical range for UK invoice finance facilities, where total costs generally fall between 0.5% and 2.0% of turnover depending on volume, debtor quality, and facility structure.
Frequently asked questions
Finance costs include all charges associated with a facility - arrangement fees, service charges, legal fees, valuation costs, and interest. This calculator helps you understand the true monthly cost by spreading all one-off fees across the facility term alongside ongoing interest.
The most effective way to compare finance options is by calculating the effective monthly cost for each. This accounts for differences in fee structures, interest rates, and terms, giving you a like-for-like comparison of total monthly outlay.
The effective monthly cost combines the monthly interest charge with any upfront fees spread evenly across the facility term. It gives a more accurate picture of total monthly outlay than looking at the interest rate alone.
Yes. Enter all one-off fees and charges (arrangement fees, legal costs, valuation fees, etc.) in the Total Fees & Charges field. The calculator spreads these evenly across the facility term to show the true monthly cost impact.
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