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APR and daily rates:
why they say different things.
APR is a useful tool for mortgages. For a 14-day company bridge, it makes the cost look 20 times larger than it is. This guide explains what APR actually measures, why short-term lenders use a daily rate, and how to compare costs honestly — in pounds, not percentages.
APR was designed for consumer credit held over years. When it is applied to business credit designed for weeks, the resulting number is technically correct but practically useless — and often alarming. This guide explains the difference, shows the maths, and gives you a framework for comparing short-term business credit costs honestly.
Credicorp lends to companies — UK limited companies, LLPs and PLCs — not to individuals. This is exempt business lending under Article 60B of the FSMA Regulated Activities Order 2001: not consumer credit, not regulated, and not required to publish a representative APR.
What APR actually measures
APR — Annual Percentage Rate — expresses the total cost of credit as a single yearly percentage. It includes interest and any mandatory fees (arrangement fees, for example), standardised across a 12-month period so that products with different structures can be placed on a level playing field.
The key assumption baked into APR is that the credit is held for a year. For a 25-year mortgage or a 3-year car loan, this is a reasonable approximation. APR is genuinely useful in those contexts because the borrower will carry the product for a substantial fraction of the annualised period.
The assumption breaks down entirely for credit held for days or weeks. A company that borrows for 14 days and repays will experience roughly 1/26th of the annual cost — but the APR figure pretends it will experience all 52 weeks of it.
The maths, side by side
Take a £10,000 Credicorp Business Bridging Loan at 0.25% per day, held for 14 days.
What the company actually pays:
£10,000 × 0.0025 × 14 = £350 in interest
Plus £5 establishment fee = £355 total cost
What the annualised APR number implies:
A daily rate of 0.25% compounds to a very high annual figure. Applied
to £10,000 over 365 days the implied cost would be many thousands of
pounds — but that number is irrelevant, because the company is
repaying at day 14.
The £355 is the real number. The APR is a calculation that assumes something that will not happen. Neither is dishonest — one is simply suited to the product and one is not.
Why a daily rate is more transparent for short-term credit
A daily rate has three properties that make it ideal for short-term business credit:
- The cost is directly calculable. Balance × 0.0025 × days = interest. No assumptions, no annualisation, no approximation. You can work it out before you apply.
- Early repayment directly reduces cost. Every day you repay earlier, you save one day's interest. This incentive is transparent and immediate. Credicorp products have no penalty for early repayment — the cost simply stops when the balance is cleared.
- The 100% cap bounds the worst case. Whatever happens, total charges cannot exceed the original borrowed amount. At 0.25%/day this ceiling is reached only at around 400 days — well beyond any intended or typical holding period. It is a safety net, not a target.
For more on how daily interest actually accrues and illustrative examples at different holding periods, read how daily interest works.
How to compare credit costs honestly
The right comparison is pounds for the same period, not percentages on different assumptions.
- Identify the rate type being quoted. Consumer products quote APR. Business credit products like Credicorp's quote the daily rate and fees. Note which you are looking at before comparing — they are not directly comparable percentages.
- Calculate total cost in pounds for your intended holding period. For a daily-rate product: balance × daily rate × days = interest, plus fixed fees. For an APR product: convert the APR to a daily equivalent (divide by 365) and do the same calculation. Compare the total pounds, not the headline percentages.
- Apply the 100% cost cap as the absolute ceiling. For Credicorp products, total charges can never exceed 100% of the principal. This is the hard floor under any comparison — it limits the worst case regardless of the period.
- Factor in speed, guarantee and structure. Total cost is one input. A bank product may have a lower daily cost but require weeks to arrange, a personal guarantee, or a pre-existing banking relationship. Credicorp's assessment is typically same working day, no personal guarantee, no prior relationship required. The right choice depends on all these factors, not cost alone.
APR and daily rate questions
The questions directors ask most about how short-term business credit is priced and compared.
What is APR?
APR stands for Annual Percentage Rate. It is a standard way of expressing the total cost of credit — including interest and mandatory fees — as a single yearly percentage, so products with different structures can be compared on one figure. APR was designed for consumer loans held over one year or more, where the annualised cost is a meaningful guide to what the borrower will actually pay.
Why is APR misleading for short-term business credit?
APR assumes the credit is held for a full year. Short-term business credit is designed to be held for days or weeks, not 12 months. When a 0.25%/day rate is annualised into an APR, the result looks enormous — because it is calculating what the cost would be if the loan ran for a year. It won't. A company that borrows £10,000 for 14 days at 0.25%/day pays £350 in interest. The APR figure for that transaction tells you nothing useful about that £350.
Why do short-term lenders use a daily rate instead of APR?
A daily rate directly reflects how the cost accrues. With a daily rate, every day the company holds the balance it pays exactly 0.25% of the outstanding amount. The total cost is simply balance × rate × days. This is transparent, predictable, and directly rewards early repayment — repay on day 10 instead of day 30 and you pay for 10 days, not 30. An APR would not capture this directly.
Does Credicorp publish an APR?
Credicorp products are business credit products, not consumer credit. Consumer credit regulation — which requires representative APR disclosure — applies to consumer lending, not to lending to bodies corporate under Article 60B of the FSMA Regulated Activities Order 2001. Credicorp publishes the daily rate (0.25%/day on the Business Bridging Loan and Flex facility), the establishment fee (£5 on the Bridging Loan), and the flat fee on Slice (6%). These figures, combined with the 100% cost cap, give a complete and honest picture of what the credit costs.
How should I compare the cost of short-term business credit?
The most honest comparison is total cost in pounds for the holding period you actually intend. For a Credicorp Business Bridging Loan: principal × 0.0025 × days + £5 = total charge. For a bank product: add arrangement fee, annual review fee and interest at the stated rate for the period. Then compare the actual pounds. This is the number that matters — not an annualised rate that assumes credit held for a year.
Related guides
For daily interest mechanics and worked cost examples, read how daily interest works. For the 100% cost cap in detail, read the 100% cost cap. For early repayment and how paying back sooner saves money, read early repayment explained. All the guides are on the Learn hub.
Transparent pricing, honest comparisons
The daily rate tells you exactly what the credit costs, for exactly as long as you need it.