Business Loan Exit Penalty Calculator
Compare the total cost of staying on your current loan versus switching to a new one — including exit penalties, arrangement fees, and break-even analysis.
By LoanLens · Updated February 2026
How this calculator works
We calculate the total remaining cost of your current loan (monthly payment × months left), then compare it against the total cost of switching: exit penalty + arrangement fee + total repayments on the new loan.
The break-even period tells you how many months of lower payments it takes to recoup the upfront switching costs. If the break-even is longer than your remaining term, switching doesn't make financial sense even if the total looks favourable.
Worked example
Types of early repayment penalty
Most UK business loans include some form of early exit charge: a percentage of outstanding balance (typically 1–5%), a set number of months' interest (typically 1–6 months), or a fixed fee. Bounce Back Loans are the notable exception — they have no early repayment charges at all.
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Frequently asked questions
How do I find my early repayment penalty?
Check your original loan agreement — it should include an early repayment clause. If you can't find it, call your lender and ask them directly.
Do Bounce Back Loans have exit penalties?
No. Bounce Back Loans have no early repayment charges. You can repay part or all of your BBL at any time without penalty.
What does "break-even" mean?
Break-even is the number of months it takes for the savings from your lower monthly payment to cover the upfront costs of switching. Until you hit break-even, you're still paying for the switch.
LoanLens provides information and educational tools, not regulated financial advice. We are not authorised or regulated by the Financial Conduct Authority. Calculator results are estimates based on the information you provide and typical market data. Always seek independent professional advice before making financial decisions.
What is a business loan exit penalty?
An exit penalty — also called an early repayment charge (ERC) — is a fee your lender charges if you repay a business loan before the end of its agreed term. The penalty compensates the lender for the interest income they lose when you exit early. Not all business loans have ERCs: Bounce Back Loans carry no early repayment penalties, and some alternative lenders charge only a small flat fee.
ERCs on commercial business loans are typically structured in one of three ways: a percentage of the outstanding balance (commonly 1–5%), a fixed number of months' interest, or a "break cost" based on the difference between your fixed rate and current swap rates. The third type — common on large fixed-rate commercial loans — can be very significant when rates have moved substantially since you borrowed.
How this calculator works
Enter your current loan details (balance, rate, remaining term, and ERC amount or percentage) alongside the proposed new loan details (rate and arrangement fee). The calculator computes two things:
- Total cost comparison: The total interest paid on your current loan for the remaining term, versus the total interest on the new loan plus switching costs (ERC + arrangement fee).
- Break-even point: How many months into the new loan it takes for the accumulated interest saving to exceed the upfront switching cost. If your remaining term is longer than the break-even point, switching is likely worthwhile.
When does switching make financial sense?
Switching makes sense when the break-even point is significantly shorter than your remaining loan term — typically, if you break even within 12 months and have more than 24 months remaining, the case for switching is strong. Switching is harder to justify if you have less than 12 months remaining on your loan (the saving period is too short), or if the ERC is disproportionately large relative to the rate difference.