2 min read
Interest cover = operating profit / interest payable. Lenders watch it to check profit comfortably covers interest.
The mechanics of risk-based pricing
Under risk-based pricing, a lender estimates your probability of default and the likely loss if you do, then sets a margin over the reference rate to compensate. The safer you look, the thinner the margin.
What moves the margin up
A thin or adverse credit score, late-filed or weak accounts, low interest cover, a volatile sector, short trading history and no security all push the margin up. Each signals higher risk.
What brings it down
A clean credit file, up-to-date accounts, strong cash flow and cover, useful security and a clear purpose all pull the margin down. So does a track record with the lender. These are the levers you can pull before you apply.
Stress-test your position
Check your interest cover and affordability before applying — it is what the lender will test. The calculator below shows how comfortably profit covers interest.
Where Credicorp fits
Credicorp lends to your company, not to you personally, and takes no personal guarantee. See indicative terms on business loans, or apply online in minutes.
Frequently asked questions
Why do two similar firms get different rates?
Because pricing is individual. Small differences in credit score, accounts, cover, security and sector move the margin, so the rates diverge even for the same product.
Can I really influence my rate?
Yes — the margin, at least. Tidy your credit file, file accounts on time, strengthen cash flow and offer security where sensible. A better risk profile earns a thinner margin.
Does the reference rate depend on me?
No. The reference rate is the market’s cost of money and is the same for everyone. Only the margin on top reflects your risk.
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