How to stress-test a business loan against rate

2 min read

Step 1Find your rate basis

Step 2Model +1% and +2%

Step 3Check cover holds

Loan amount (£)

Annual interest rate (%)

Term (months)

Illustrative only. Assumes a fixed rate and equal monthly repayments (annuity). Your actual offer depends on Credicorp’s assessment of your company.

Step 1 — confirm how your rate moves

Establish whether the loan is fixed or variable, and if variable, the reference rate and pass-through. A tracker moves fully with the benchmark; a fixed rate does not, until it reverts.

Step 2 — model a 1% and 2% rise

Recalculate your monthly payment at your current rate plus 1% and plus 2%. On a £100,000 balance, +1% is roughly £1,000 a year more. Use the loan repayment calculator below.

Step 3 — check interest cover still holds

Run the stressed interest through your interest coverage ratio. If cover falls below about 1.5–2× under stress, the loan may be too large or too exposed.

Step 4 — plan your response

Decide in advance what you would do — cut costs, raise prices, overpay, or consider a cap or fixing. A plan made calmly beats a scramble when rates move.

Step 5 — size the loan to survive the stress

If the stressed payment breaks affordability, borrow less, shorten the term, or fix. Better to right-size now than to strain later.

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.