Whether you're starting a business, expanding operations, or managing cash flow, understanding the true cost of business financing is essential. This calculator reveals your monthly payments, total interest costs, and helps you compare different loan options.
How This Calculator Works
This calculator analyzes business loan costs:
- Loan Amount: How much you need to borrow
- Interest Rate: Annual interest rate (APR)
- Loan Term: Repayment period in months or years
- Payment Type: Monthly, weekly, or bi-weekly payments
- Monthly Payment: Your regular payment amount
- Total Cost: Principal plus all interest paid
The Formula Explained
Monthly Payment = P Ă— [r(1+r)^n] / [(1+r)^n - 1]
Where:
- P = Principal (loan amount)
- r = Monthly interest rate (annual rate Ă· 12)
- n = Number of payments
Total Interest = (Monthly Payment Ă— n) - Principal
Step-by-Step Example
Comparing Business Loan Options
Borrowing $100,000 for expansion:
| Loan Type | Rate | Term | Monthly Payment | Total Interest |
| Bank Loan | 8% | 5 years | $2,028 | $21,680 |
| SBA Loan | 7% | 10 years | $1,161 | $39,320 |
| Online Lender | 15% | 3 years | $3,467 | $24,812 |
Lower rate isn't always cheaper—the SBA loan costs more total due to longer term!
Frequently Asked Questions
What types of business loans are available?
Common options: (1) Term loans—lump sum with fixed payments, (2) SBA loans—government-backed, lower rates, longer terms, (3) Lines of credit—flexible borrowing as needed, (4) Equipment financing—secured by the equipment, (5) Invoice factoring—advances on receivables. Each has different rates, terms, and qualification requirements.
What interest rate can I expect on a business loan?
Rates vary widely based on creditworthiness and loan type. Bank loans: 5-10%, SBA loans: 6-9%, Online lenders: 10-30%+. New businesses without revenue history pay more. Strong financials and collateral lower rates. Always compare multiple offers.
What is the difference between APR and interest rate?
Interest rate is the base rate charged on the principal. APR (Annual Percentage Rate) includes fees and other costs, showing the true annual cost. Some lenders quote low rates but add origination fees. Compare APR, not just interest rate, for accurate comparison.
How do I qualify for business loan?
Typical requirements: (1) Time in business (2+ years preferred), (2) Annual revenue minimums ($50,000-$250,000+), (3) Personal credit score (650+ for traditional, 500+ for online), (4) Business bank statements, (5) Tax returns. Requirements vary significantly by lender type.
Should I choose a shorter or longer loan term?
Shorter terms: Higher payments but less total interest, faster debt-free. Longer terms: Lower payments, better cash flow, but more total interest. Match the term to the asset's lifespan—don't take 10-year financing for equipment that lasts 5 years.
What is an SBA loan and how is it different?
SBA loans are partially guaranteed by the government, reducing lender risk and enabling lower rates and longer terms. Popular programs: SBA 7(a) (up to $5M, general use) and SBA 504 (real estate/equipment). Trade-off: Extensive paperwork and slower approval (2-3 months vs days for online lenders).
How do business loan payments affect cash flow?
Monthly payments directly reduce available cash. Before borrowing, ensure your business can comfortably cover payments even during slow months. A common guideline: debt service shouldn't exceed 20-25% of gross revenue. Build a cash cushion before taking on significant debt.
Should I put up personal collateral for a business loan?
Many small business loans require personal guarantees, making you liable if the business can't pay. Providing collateral (home, equipment, savings) may reduce rates but puts personal assets at risk. Weigh lower payments against potential personal loss. Unsecured loans cost more but protect personal assets.
Key Points to Remember
- Compare APR, not just rate: Include all fees in your comparison
- Match term to purpose: Don't finance short-term needs with long-term debt
- Cash flow first: Ensure payments are sustainable even in slow months
- Shop multiple lenders: Rates vary dramatically across lender types
- Understand personal liability: Read guarantee and collateral terms carefully