Which business loan structure is cheapest?

A table loan, almost always. On the worked example of $400,000.00 at 8.5% over 10 years, table principal and interest costs $4,959.43 a month, $595,131.31 in total and $195,131.31 of interest, with nothing owing at the end. Every other structure costs more interest because principal is repaid more slowly, and interest is charged on whatever principal remains. There is no structure that is both cheaper and easier on cash: that trade-off is the whole point.

Is revolving credit cheaper than a table loan?

No, although it looks cheaper if you only read the total paid. On the worked example, revolving credit run as interest only costs $2,833.33 a month and $340,000.00 over ten years, against $595,131.31 for the table loan. But at the end of the ten years the revolving facility still owes the full $400,000.00, while the table loan owes nothing. Counting that, revolving credit has cost $740,000.00 against the table loan's $595,131.31: it is $144,868.69 more expensive, not $255,131.31 cheaper.

What does interest only really cost a business?

On the worked example, three years of interest only costs $2,833.33 a month during the period, then the repayment jumps to $6,334.59 for the remaining seven years because the same $400,000.00 now has to be repaid over less time. Total interest rises from $195,131.31 to $234,105.91, so the three years of relief cost $38,974.60. That can be entirely worthwhile if the business needs the cash during a specific period, but the size of the jump at the end of the period is what catches owners out.

What is the difference between total paid and total cost on a loan?

Total paid is the cash that left the business. Total cost adds whatever principal is still outstanding at the end, because that debt is real and still has to be repaid. Any structure that does not amortise will always show a low total paid, which is why comparing on that basis is misleading. On the worked example the ranking reverses completely: revolving credit has the lowest total paid at $340,000.00 and the highest total cost at $740,000.00.

Which structure has the lowest cash cost in year one?

Interest only and revolving credit tie on the worked example, both costing $34,000.00 in year one against $59,513.13 for the table loan. That is $25,513.13 of cash freed in the first year. They differ afterwards: revolving credit stays at $34,000.00 indefinitely and never repays anything, while the interest only structure jumps to $76,015.08 a year once the three year period ends. Cash relief now is always borrowed from later.

Is interest on a business loan tax deductible in New Zealand?

Interest on borrowing used for business purposes is generally deductible, while the principal portion of a repayment never is. That does not change which structure is cheapest, it only changes the after-tax size of the difference, which is why this calculator reports interest rather than attempting to net it down at an assumed tax rate. Where a facility is used for both business and private purposes the deduction has to be apportioned, and drawing personal spending from a revolving business facility is the most common way that gets messy.

When does a split loan structure make sense?

When part of the borrowing is genuinely permanent and part genuinely fluctuates. On the worked example a 50/50 split costs $3,896.38 a month, repays half the principal over the term and leaves $200,000.00 owing, for a total cost of $667,565.65. It sits between the table loan and the revolving facility on both measures, which is what a compromise looks like. It is a poor choice if the revolving portion is really just permanent debt you would rather not amortise.

Should I choose the cheapest structure or the one with the lowest repayment?

Choose the cheapest structure your business can comfortably service, which is not the same as either extreme. A structure the business cannot service will fail regardless of how efficient it looks on paper, and a structure that never repays principal leaves the debt permanently on the balance sheet where it constrains every future decision. The useful question is what the freed cash is actually for: funding growth that earns more than 8.5% justifies the extra interest, while funding ordinary running costs usually signals a problem the loan structure will not fix.

Business Loan Structure Calculator

Quick answer: On $400,000.00 at 8.5% over 10 years, a table loan costs $4,959.43 a month and $595,131.31 in total with nothing owing at the end. Revolving credit costs only $2,833.33 a month and $340,000.00 paid, but still owes the full $400,000.00, so its true cost is $740,000.00. The cheapest structure is the table loan; the easiest on cash in year one is interest only at $34,000.00 against $59,513.13. Those are never the same answer.

The same borrowing behaves very differently depending on how it is structured, and the differences are large enough to change whether a business can carry the debt at all. This calculator fixes the amount, the term and the rate, then runs the identical borrowing through four structures side by side: a table loan repaying principal and interest throughout, an interest only period that converts to principal and interest, a revolving credit facility run as interest only, and a split between a table portion and a revolving portion. For each it reports the monthly repayment, the cash cost in year one, the total interest, the principal still outstanding at the end, and a total cost that adds the two together. That last column is the one that matters, because comparing structures on total paid systematically flatters anything that does not repay principal: a facility that pays interest for ten years and still owes every dollar of the original loan has not been cheap, it has simply deferred the cost. The page flags the cheapest structure and the lowest cash cost separately, since they are almost never the same, and leaves the choice where it belongs, with whichever constraint actually binds your business.

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Updated August 2026 Current 2026/27 rules applied.

Interest on business borrowing is generally deductible; principal never is. That does not change which structure is cheapest, only the after-tax size of the gap, which is why this page reports interest in full rather than netting it down at an assumed tax rate. Two cautions. Where a facility funds both business and private spending the interest must be apportioned, and a revolving business facility used for personal drawings is the most common way that becomes difficult to defend. And a structure is not deductible because of its name: what matters is the use to which the borrowed money is actually put.

Verification & Methodology

Table loan uses the standard amortising formula, repayment = P × i / (1 − (1+i)⁻ⁿ), with i the monthly rate and n the number of months.
Interest only then P&I charges interest alone during the chosen period, then amortises the full original principal over the remaining term. The principal does not reduce during the interest only period, which is why the later repayment is higher than a table loan's.
Revolving credit is modelled as interest only for the whole term on the drawn balance, with the principal outstanding at the end. This is the honest base case: a facility you never pay down.
Split amortises the table portion over the full term and runs the revolving portion interest only, leaving that portion outstanding.
Total cost = total paid + principal still owing. This is the only basis on which structures that repay principal and structures that do not can be fairly compared.
Year one cash cost = the first twelve months of repayments, which is what the business actually has to find.
Assumptions: a constant interest rate throughout, no fees, no lump sum repayments, and a revolving facility that stays fully drawn. Real facilities fluctuate, which reduces interest on a revolving structure by an amount only you can estimate.
Not financial advice. Last verified: August 2026.

The borrowing Loan amount

Interest rate

% p.a.

Term

years

Business term debt is commonly 5 to 10 years, shorter than a mortgage.

Structure settings Interest only period

years

Applies to structure B only. The full principal is then repaid over the remaining term. Split: portion on a table loan

The remainder sits on revolving credit and is not repaid.

$595,131.31

cheapest total cost: table loan

Cheapest overall

Table P&I

$595,131.31 total cost

Lowest year 1 cash

Interest only

$34,000.00 in year 1

Cash freed year 1

$25,513.13

against the table loan

Extra cost of that

$38,974.60

over the full term

The same $400,000 under four structures

Structure	Monthly	Year 1 cash	Total interest	Still owing	Total cost
A. Table principal and interest	$4,959.43	$59,513.13	$195,131.31	$0.00	$595,131.31
B. Interest only 3 years, then P&I	$2,833.33	$34,000.00	$234,105.91	$0.00	$634,105.91
C. Revolving credit, interest only	$2,833.33	$34,000.00	$340,000.00	$400,000.00	$740,000.00
D. Split 50% table, 50% revolving	$3,896.38	$46,756.57	$267,565.65	$200,000.00	$667,565.65

Total cost adds the principal still owing to the cash paid. Without that column, revolving credit appears to be the cheapest structure on the page, which it is not.

What the interest only period actually costs

Repayment during the 3 year interest only period	$2,833.33
Repayment for the remaining 7 years	$6,334.59
Increase when the period ends	$3,501.26
Cash freed during the interest only period	$76,539.39
Extra interest paid for that relief	$38,974.60

The jump at the end of an interest only period is the single most common surprise in business lending. Diarise it when the loan is drawn, not when the letter arrives.

Revolving credit, compared honestly

Total paid on revolving credit	$340,000.00
Total paid on the table loan	$595,131.31
Apparent saving	$255,131.31
Principal still owed on revolving credit	$400,000.00
Actual extra cost of revolving credit	$144,868.69

Two Winners, Never The Same One

Every structure on this page trades cost against cash. Repay principal faster and you pay less interest but need more cash each month. Repay it slower and the monthly figure drops while the total rises. There is no structure that wins both, and any lender or broker presenting one as if it does is describing the cash side and quietly leaving out the other.

On the worked example the table loan is cheapest at $595,131.31 and interest only is easiest on cash at $34,000.00 in year one. The gap in year one cash is $25,513.13, and the gap in lifetime cost is $38,974.60. Whether that is a good trade depends entirely on what the freed cash does.

Worked Example: $400,000 At 8.5% Over 10 Years

A table loan repays $4,959.43 a month, costs $195,131.31 in interest, and finishes owing nothing. Total cost $595,131.31.

Three years of interest only costs $2,833.33 a month during the period, then $6,334.59 for the remaining seven years, because the full $400,000.00 now has to be repaid in less time. Total interest rises to $234,105.91. The relief was real, $76,539.39 of cash retained over three years, and it cost $38,974.60.

A revolving facility left fully drawn costs $2,833.33 a month indefinitely. Over ten years that is $340,000.00 paid, and the business still owes the entire $400,000.00.

The 50/50 split sits between them at $3,896.38 a month, $267,565.65 of interest, $200,000.00 still owing and $667,565.65 of total cost.

Total Paid Is The Wrong Comparison

Read the total paid column alone and revolving credit is the clear winner: $340,000.00 against $595,131.31, an apparent saving of $255,131.31. It is the most persuasive wrong number in business lending.

The table loan finished the ten years owning the asset outright. The revolving facility finished owing $400,000.00, exactly what it started with. Adding that back, revolving credit cost $740,000.00 against $595,131.31, which is $144,868.69 more, not $255,131.31 less. The ranking does not narrow, it reverses.

This is not an argument against revolving credit, which is a genuinely useful facility for working capital that rises and falls with the trading cycle. It is an argument against using it as permanent term debt because the repayments look manageable.

What Is The Freed Cash Actually For?

This is the question that resolves the choice, and it has only three honest answers.

If the cash funds growth that earns more than the interest rate, deferring principal is straightforward arithmetic in your favour. Freeing $25,513.13 a year to buy a machine returning 20% beats paying down debt at 8.5%.

If it funds a known, temporary trough, a fit-out period, a seasonal dip, a large contract's working capital, then an interest only period matched to that trough is exactly what the structure is for. Match the period to the trough rather than taking the longest available.

If it funds ordinary running costs, the structure is not solving the problem. A business that cannot service a table loan on its borrowing has a margin or a pricing problem, and lengthening the debt only postpones the point at which that becomes unavoidable. Our Minimum Price Calculator and Overhead Recovery Rate Calculator are more useful in that case than any lending structure.

Before You Sign

Three things are worth confirming with the lender, none of which appear in the repayment figure. Whether the facility can be repaid early without a break cost, which matters most on fixed rates. What happens at the end of an interest only period, specifically whether it converts automatically or requires a new application, since a re-application in a bad year is when facilities get withdrawn. And what security is taken, because a general security agreement over the company plus a personal guarantee is a materially different proposition from a charge over one asset.

If you are restructuring existing debt rather than borrowing new money, our Business Debt Restructure Calculator models the change from where you actually are.

Related NZ Business Lending Calculators

Business Loan Repayment Calculator: repayments on a single straightforward facility.
Business Debt Restructure Calculator: modelling a change to debt you already carry.
Debt Service Coverage Ratio Calculator: whether earnings cover the repayments.
Interest Only vs Principal and Interest Calculator: the same trade-off on a mortgage.
Revolving Credit Calculator: how a revolving facility behaves when it does fluctuate.
Business Structure Basics: background on this topic.

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