What is fixed simple interest loans?
Fixed Simple Interest also referred to as total interest percentage is a quick and easy way of calculating the total payback on a loan.
Fixed simple interest is calculated by multiplying the principal amount by the fixed rate or factor rate.
Benefits of a fixed simple interest loans
- Transparent easy to calculate total payback
- Does not compound or accrue
- Each payment is subtracted from total payback
- Easy to calculate return on investment ( ROI )
How It works
Fixed Simple Interest rates are determined by two factors
- Tern length–shorter term cheaper rate versus longer term higher rate
- Credit risk profile Underwriting
Simple fixed Interest loans are very similar to factoring programs, the shorter the term the cheaper the coast and logger the terms the more expensive the coast.
Typically the funds cost anywhere between 1-3 cents on a dollar per month, Depending on the risk profile of the business.
Fixed Simple typically don’t operate on annual percentage rate APR , since these loans do not compound or accrue on a daily basis like Compound loans.
Fixed simple interest loans are great for businesses that
- Buy inventory in bulk and want to see an immediate return on investment.
- Have short term cash flow stress, vendors are paying 30-60 days out.
- Have an expected expense, and just looking for short term cash flow loan to meet the expense.
- Need access to quick capital to fund their investment opportunity and see a return on investment.
How fixed Simple Interest loans work example
Rates can vary from 6%-38% Fixed simple rates not annualized interest rates
Term range 3-36 Months.
|Item||6 Month loan||12 months loan||18 months loan|
|Fixed Simple Rate||x 1.09%||x 1.19%||x 1.32%|
|Total loan Payback||$54,500||$59,500||$66,000|
|Weeks||26 weeks||52 weeks||72 weeks|
|Weekday payments||126 payments||252 payments||378 payments|
|126Monday-Friday Daily payments||$433.53||$234.12||$183.33|
|Total Cost Of loan||$4,500||$9,000||$16,000|
|Cost per Month cent on a dollar||1.5%||1.58%||1.77%|
Fixed simple Interest loans are underwritten based on cash flow of the business not on profitability or collateral.
Typically we require at least $10,000 in monthly gross revenue and 5 monthly deposits
Typically we require at least 1 year in Business
Typically we require 550 fico score
Fixed Simple interest loans do not require
On fixed simple interest loans, the rates tend to be a little bit higher then compound loans because these loans do not require or evaluate your business on.
Debt to service Ratio
Financials: Profit & loss and balance sheets
Multiple loan amount by fixed simple rate
Example: On a 6 month $50,000 loan x 1.09 fixed simple rate total $54,500
Divide payback loan amount by number of weekly payments
Example On a 6 month payback of $54,500 – 26 payments total $2096.00
Total Payback Minus the loan amount
Example On a 6 month $54,500 payback – $50,000 loan total $4,500 executives.