Worked Examples

Five companies of differing financial strength, each borrowing against three different security positions. Revenue, sector, size and lease term are identical in every cell, so any difference between two numbers is caused by exactly one thing. The figures that make each company what it is are published directly beneath the grid.

Five-year term, £4.2m revenue, same sector and size throughout. Risk-free base rate 4.72% for this term. Every figure generated from the live engine. See “How these were produced” below.

What defines each company

Revenue is £4,200,000 in every row, as is the sector, the credit size band (derived from that turnover) and the 5-year lease term. Only the figures above differ. These are inputs, not scores.

Read across a row and you see what security is worth to a given company. Read down a column and you see what credit quality is worth at a given security position. Both directions are the point: a rate that did not move in those directions, by sensible amounts, would not be defensible to an auditor whatever its headline number.

Three things are worth noticing.

Security is worth the same to everyone: 294 basis points in every row. Moving from a fixed charge over an asset to an unsecured position costs the same whether the company is the strongest in the grid or the weakest. That is deliberate. What security is worth to a lender is a function of what they recover if things go wrong, not of how likely that is; how likely it is has already been priced, separately, in the financial pillar. Pricing it twice would be double-counting.

Credit quality is worth far more than security. Across the unsecured column the best and worst companies are 797 basis points apart, against 294 for security, more than two and a half times as much. For a UK SME, who you are matters considerably more than what you can pledge.

The steps are not even. Market leader to established performer is 16 basis points. Ordinary trading SME to under pressure is 543. Credit risk is not linear. The cost of borrowing rises slowly across the healthy range and then sharply once cover and leverage deteriorate, which is how lending actually behaves. A model that moved in equal steps would be describing something else.

They are names for five invented companies, chosen to span the range, and they mean exactly what the figures beneath the grid say they mean. “Market leader” is not a grade awarded by the calculator; it is shorthand for a company with a 27% EBITDA margin, interest cover of 25.6 times, debt at a fifth of net worth and eighteen years of trading. “Distressed” is shorthand for one losing money at operating level with negative net worth and two years of history. Anyone who disagrees with where a row sits can read the figures and say so.

These are not the bands the report uses. A Lease Rater report classifies the rate it has calculated on a separate six-point scale, running from excellent to vulnerable, and that classification describes the rate rather than the borrower. The two can differ, and often do. The strongest company in this grid is classified excellent when it borrows against a fixed charge and only satisfactory when it borrows unsecured, because it is the same company paying a materially different rate. That is the correct behaviour: the band describes the cost of borrowing, which is what the lease liability is discounted at, not a credit opinion on the entity.

Neither scale is what FRS 102 asks for. The standard asks for a rate, together with a record of why the rate implicit in the lease was not readily determinable, which rate was chosen, how the evidence was gathered, whether leases were pooled, and when the rate was struck. Every Lease Rater report carries that record. The bands and the names on this page are presentation: useful for explaining the result, and not themselves the evidence.

This page shows that the method behaves coherently: that each factor moves the rate in the right direction, by a proportionate amount, for a reason that can be stated. That is what FRS 102 asks of a discount-rate estimate: a reasonable, supportable method applied consistently, using observable inputs.

It is not a claim that these rates match what any particular lender would quote. They are not benchmarked against completed facilities and are not presented as market evidence. A different lender, on a different day, would price any of these companies differently, and the range Lease Rater publishes alongside each rate exists precisely because the number is an estimate rather than a quotation.

For context rather than validation: the Bank of England's effective rate on new fixed-rate lending to UK SMEs was 7.03% in 2026, against a five-year risk-free rate of around 4.7%. The middle of this grid sits where a working banker would expect an ordinary trading company to sit. The ends are deliberately further out than most real cases.

Each cell is a complete calculation. The inputs are a full set of financial statements for an invented company, run through the same engine, the same configuration and the same rate curve that a paying customer's calculation uses. Nothing is approximated, interpolated or rounded for presentation beyond two decimal places.

The grid is rebuilt by running one script against the live engine, and the test suite re-runs the engine independently and fails if this page quotes any rate the calculator no longer produces. A sales page that drifts away from the product is a liability, so the build refuses to publish a grid that is not internally coherent. If credit quality or security ever priced out of order, the script stops rather than publishing it.

The four pillars and their weights are published on the methodology page, as is each pillar's contribution in basis points on every report. This page adds the effect of security type on the final rate, which anyone comparing two columns can calculate.

This page also publishes the figures that define each illustrative company. Those are inputs, of the same kind a customer enters, and they are published so that the five names mean something checkable rather than something asserted.

The calibration inside the financial pillar, meaning the fourteen metrics, their six bands and the thresholds between them, is not disclosed here or anywhere else, and is not recoverable from this grid. Those fourteen metrics move together as a single pillar score across these rows, and an aggregate cannot be decomposed back into its parts.

These are invented companies. Yours is not. A calculation takes a few minutes and produces the full report and schedules rather than a rate on its own. Your first one is free to preview, which shows the headline rate and the key drivers; the full report and schedules need a credit to unlock.

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