Can I pay off a business loan early?

When early repayment makes sense

• You have surplus cash with no higher-return alternative use.
• The loan is on a high rate (typical of unsecured + alternative-lender lending) — paying down high-cost debt is rarely a bad call.
• You're refinancing to a cheaper facility — make sure the savings cover the break cost plus any new establishment fees.
• You're selling the business or asset that the loan funded.

When it might not

• The loan is cheap (e.g., low-rate property-secured) and the cash has higher-return alternative uses.
• Break costs eat the savings — common on long-dated fixed-rate loans in a falling-rate environment.
• The loan provides flexibility (e.g., line of credit, revolving facility) you'd lose by closing it.
• Cash buffer matters more — paying off the loan leaves you cash-poor for operations.

How break costs are calculated

Break costs on fixed-rate business loans typically compensate the lender for the gap between:

• The fixed rate on your loan, and
• The current market rate for the remaining term.

If market rates have fallen below your fixed rate, the lender loses interest and charges a break cost to recover that. If market rates have risen above your fixed rate, the break cost is usually nil. The exact formula varies by lender — request the calculation in writing.

How to request a payout figure

1. Contact your lender (relationship banker or alternative lender support) and request a written payout statement.
2. The statement should show: principal balance, accrued interest, break cost (if any), discharge fees.
3. The figure is usually valid for a few business days — confirm the validity window.
4. If refinancing, your new lender will usually request the payout figure as part of settlement.