Free business tool

Is your loan book actually making money?

Interest coming in is not profit. Put in your portfolio, what your money costs, what you lose to default and what it costs to keep the doors open — and see what the business keeps each month, the size it has to reach to break even, and how long until it gets there.

Your loan book today

Loan portfolio outstanding

Principal still owed to you across every active loan — not what you have disbursed in total.

Currency

Portfolio yield

Interest and recurring fees actually collected in a year, divided by your average portfolio. Usually well below your quoted rate.

Loan losses a year

Write-offs net of recoveries, as a share of the portfolio, over a year — an annual rate, not a lifetime one.

What it costs to run

Cost of borrowed funds

Blended annual rate on deposits, bank lines and investor notes.

Share of the book funded by borrowing

The rest is your own capital — or members' shares, for a chama or SACCO. It drives return on equity.

Operating expenses a month

Salaries, rent, software, marketing and everything else that has to be paid whether or not a loan is written.

Net profit per month

-ZAR 8,200

-ZAR 98,400 a year · -20.5% ROE

After cost of funds, loan losses, operating expenses and tax.

Your book is below break-even size

What the spread earns does not yet cover running costs. The portfolio has to grow into its overheads — or the spread has to widen.

Break-even portfolio: ZAR 1,467,391
Still to grow: ZAR 267,391 (+22.3%)
First profitable month at 4% growth: Month 8

Key ratios

Return on assets: -8.2%; Annual net profit ÷ portfolio
Return on equity: -20.5%; Annual net profit ÷ your capital
Net interest margin: 46%; Income less cost of funds, a year
Cost-to-income: 104.8%; Operating cost ÷ income after funding

Where a month's income goes

Everything the book earns in a month, line by line, down to what the business keeps.

Interest and fee incomeZAR 54,400
Cost of funds-ZAR 8,400
Loan losses-ZAR 6,000
Operating cost-ZAR 48,200
TaxZAR 0
Net profit-ZAR 8,200

An estimate for planning, not a set of accounts. It treats the month as a steady state — income and losses as a straight share of today's portfolio — and gives no credit for recoveries after write-off or for interest earned on idle cash. Return on assets is measured on the loan portfolio alone.

Where the business is heading

The same book, month by month, as the portfolio grows and running costs grow with it. Month 1 is the business you described above.

Project over

Portfolio growth a month

Compounded. Growth is funded at the same borrowed share as today.

Operating cost growth a month

New staff and branches. Usually slower than the book, which is the whole point of scale.

First profitable month: Month 8; At 4% portfolio growth a month
Losses to fund first: ZAR 33,952; Deepest the running total goes
Portfolio in month 24: ZAR 2,957,659; 2.5× today's book
Net profit over 24 months: ZAR 159,837; ZAR 25,597 a month by the end

Net profit each month

Projected profit and loss, month by month
Month	Portfolio	Income	Cost of funds	Loan losses	Operating cost	Net profit	Cumulative
1	ZAR 1,200,000	ZAR 54,400	ZAR 8,400	ZAR 6,000	ZAR 48,200	-ZAR 8,200	-ZAR 8,200
2	ZAR 1,248,000	ZAR 56,576	ZAR 8,736	ZAR 6,240	ZAR 48,778	-ZAR 7,178	-ZAR 15,378
3	ZAR 1,297,920	ZAR 58,839	ZAR 9,085	ZAR 6,490	ZAR 49,366	-ZAR 6,102	-ZAR 21,480
4	ZAR 1,349,837	ZAR 61,193	ZAR 9,449	ZAR 6,749	ZAR 49,963	-ZAR 4,969	-ZAR 26,448
5	ZAR 1,403,830	ZAR 63,640	ZAR 9,827	ZAR 7,019	ZAR 50,571	-ZAR 3,776	-ZAR 30,225
6	ZAR 1,459,983	ZAR 66,186	ZAR 10,220	ZAR 7,300	ZAR 51,189	-ZAR 2,523	-ZAR 32,747
7	ZAR 1,518,383	ZAR 68,833	ZAR 10,629	ZAR 7,592	ZAR 51,817	-ZAR 1,205	-ZAR 33,952
8	ZAR 1,579,118	ZAR 71,587	ZAR 11,054	ZAR 7,896	ZAR 52,457	ZAR 135	-ZAR 33,817
9	ZAR 1,642,283	ZAR 74,450	ZAR 11,496	ZAR 8,211	ZAR 53,108	ZAR 1,226	-ZAR 32,591
10	ZAR 1,707,974	ZAR 77,428	ZAR 11,956	ZAR 8,540	ZAR 53,770	ZAR 2,372	-ZAR 30,219
11	ZAR 1,776,293	ZAR 80,525	ZAR 12,434	ZAR 8,881	ZAR 54,445	ZAR 3,574	-ZAR 26,645
12	ZAR 1,847,345	ZAR 83,746	ZAR 12,931	ZAR 9,237	ZAR 55,131	ZAR 4,835	-ZAR 21,810

First 12 of 24 months

Opens in Excel, Sheets or any spreadsheet.

If losses run higher than you expect

The same business across a range of annual loss rates, everything else held still. A bad cohort is the most common way a profitable lender stops being one. Your own assumption is marked.

Net profit and break-even portfolio at each annual loss rate
Annual loss rate	Net profit a month	Net profit a year	ROE	Break-even portfolio
0%	-ZAR 2,200	-ZAR 26,400	-5.5%	ZAR 1,261,682
2%	-ZAR 4,200	-ZAR 50,400	-10.5%	ZAR 1,323,529
4%	-ZAR 6,200	-ZAR 74,400	-15.5%	ZAR 1,391,753
6% (yours)	-ZAR 8,200	-ZAR 98,400	-20.5%	ZAR 1,467,391
8%	-ZAR 10,200	-ZAR 122,400	-25.5%	ZAR 1,551,724
10%	-ZAR 12,200	-ZAR 146,400	-30.5%	ZAR 1,646,341
15%	-ZAR 17,200	-ZAR 206,400	-43%	ZAR 1,942,446
20%	-ZAR 22,200	-ZAR 266,400	-55.5%	ZAR 2,368,421

Opens in Excel, Sheets or any spreadsheet.

Why a busy loan book can still lose money

Profit in lending is a spread, not a sale. Four things decide whether that spread survives the month.

1
Yield is what you collect, not what you quote
A 5% a month product does not earn 60% a year. Loans in arrears stop paying, money sits idle between repayment and the next disbursement, and early settlements cut interest short. Measure yield from cash actually received over the average book — it is usually a good deal lower than the rate card.
2
Operating cost is fixed until the book catches up
Salaries, rent and software cost the same whether the book is half its size or double it. That is why a young lender can price well and still lose money every month — and why there is a portfolio size below which no amount of discipline makes it profitable. This calculator finds that size.
3
A point of losses costs more than a point of funding
Cost of funds is only charged on the share of the book you borrowed. Losses come out of the whole book, your own capital included. On a book that is 60% borrowed, a one-point rise in write-offs does as much damage as a 1.7-point rise in what your lenders charge you.
4
Borrowing magnifies the result in both directions
Return on equity is return on assets multiplied by how much of the book you did not fund yourself. Leverage turns a thin profit into a handsome ROE — and turns a small loss into a hole in your capital just as quickly. Watch ROA for how well the business runs, and ROE for what it does to the owners.

The five lines of a lender's profit and loss

Every lending business, from a chama to a digital lender, reduces to the same statement. Each line has its own way of going wrong.

Line	The question it answers	How this calculator gets it
Interest and fee income	What did the book actually bring in?	Portfolio × yield ÷ 12, plus the upfront fee on each loan disbursed that month.
Cost of funds	What did the borrowed money cost?	Portfolio × borrowed share × cost of funds ÷ 12. Your own capital is treated as free here and judged through ROE instead.
Loan-loss provisions	How much of the book will never come back?	Portfolio × annual loss rate ÷ 12, taken evenly every month rather than in lumps when loans are finally written off.
Operating expenses	What does it cost to keep the business running?	Your monthly expenses, plus the cost to originate each new loan.
Tax	What does the government take from the rest?	Your tax rate on any month with a pre-tax profit. Loss months carry no tax and no credit.

What is left is net profit. Divide it by the portfolio and you have return on assets; divide it by your own capital and you have return on equity. Push the portfolio to the point where it is exactly zero and you have the size your business has to reach.

Break-Even Interest Rate Calculator

Lending profitability, answered

How do I work out my portfolio yield?

Add up the interest and recurring fees you actually received over the last twelve months and divide by the average of your month-end portfolio over the same months. Use cash collected, not interest accrued — accrued interest on loans that never pay is the most flattering number in lending.

Should the loss rate be annual or over the life of a loan?

Annual. This tool looks at the business month by month, so it wants write-offs net of recoveries over a year as a share of the average portfolio. That is the opposite of the break-even rate calculator, which prices a single loan and wants the loss over its whole term.

What is the break-even portfolio size?

The portfolio at which what the book earns after funding and losses exactly pays your monthly expenses. Below it, every month loses money however well you price. If the calculator says no size breaks even, your yield does not cover cost of funds and losses together — growing the book will only grow the loss.

Why is cost-to-income measured before loan losses?

Because it is meant to measure efficiency, not credit quality. It divides operating cost by income after cost of funds, so a lender can see how much of every unit earned the office spends — separately from how much the borrowers lose. Above 100% means the business cannot pay its running costs even before a single default.

How does the projection work?

It starts from the book you described and grows the portfolio and the operating expenses by their own monthly rates, compounded. New loans grow with the portfolio, and yield, loss rate, funding mix and tax stay where you set them. It is a steady-state view — a fast-growing book usually shows lower losses on paper than it will once those loans age.

Does this work for a chama or group lending scheme?

Yes. Treat members' contributions as equity, so set the borrowed share to whatever you have raised from outside — often zero. Operating expenses may be little more than meeting costs and a treasurer's allowance, and tax is often zero. Return on equity then reads as the return on members' savings, which is the number a chama actually cares about.

Can I use this instead of proper accounts?

No. It is a planning model for questions like "how big do we need to be" and "what happens if defaults double". Your accounts will differ: provisioning rules such as IFRS 9 take losses earlier than write-offs do, interest accrues daily, and the funding mix shifts as you grow. Use it to frame the decision, then check it against your books.

Stop estimating what your book earns

Lendbox tracks every repayment, write-off and fee as it happens, so portfolio yield, losses and running costs come from your live book — not from figures you typed into a calculator once a quarter.

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