™
Flat fee ↔ APR.
A flat fee and an APR describe the same cost in different languages. This converts a flat fee over a short term into an annualised rate — and shows why APR looks alarming on a few weeks even when the cash cost is small.
- Fee in pounds—
- Simple annualised rate—
- Representative APR (compounded)—
—
APR assumes the same cost repeats every term for a year and compounds — which a one-off, fixed-fee advance does not. On short terms the APR number can run to hundreds of per cent while the actual pounds paid are modest. For comparing two genuinely short products, the cash cost and the flat fee are the clearer measures.
Read APR with care
APR is a fair way to compare long, repeating credit such as a mortgage or a multi-year term loan. It is a poor guide to a single advance repaid in weeks. The honest comparison for short-term business credit is the total pounds you pay and whether a cost cap applies. See flat fees vs APR and cost caps explained.