A business loan calculator works out the fixed monthly payment, total interest and total repaid on a business term loan from the amount, rate and term. $100,000 at 8% for 60 months costs $2,027.64 a month and $21,658.37 in interest.
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How to use the business loan calculator
- Enter the loan amount.
- Enter the annual interest rate.
- Enter the term in months.
- Read the monthly payment, total paid and total interest.
What formula does the business loan calculator use?
- Payment = P × r ÷ [1 − (1 + r)−n]
- P = amount borrowed, r = annual rate ÷ 12, n = number of monthly payments
- Total interest = payment × n − P
The business loan calculator assumes a standard fully amortizing term loan: a fixed rate, equal monthly payments, and nothing left to pay at the end.
Business loan calculator worked example
| Rate | Months | Payment | Total interest |
|---|---|---|---|
| 6% | 60 | $1,933.28 | $15,996.81 |
| 8% | 36 | $3,133.64 | $12,810.92 |
| 8% | 60 | $2,027.64 | $21,658.37 |
| 8% | 84 | $1,558.62 | $30,924.20 |
| 10% | 60 | $2,124.70 | $27,482.27 |
| 12% | 60 | $2,224.44 | $33,466.69 |
Borrowing $100,000 at 8% for 60 months costs $2,027.64 a month. Over five years you repay $121,658.37, so interest totals $21,658.37. Stretching the term to 84 months cuts the payment to $1,558.62 but raises total interest to $30,924.20. A shorter term saves interest but strains monthly cash flow, which is often the scarcer resource in a small business.
Common types of business financing
- Bank term loans: a lump sum repaid monthly, as modeled here.
- SBA 7(a) loans: made by lenders and partly guaranteed by the U.S. Small Business Administration. The maximum 7(a) loan amount is $5 million, and the SBA sets caps on the interest rates lenders can charge.
- Lines of credit: borrow and repay as needed; you pay interest only on the amount drawn.
- Equipment loans: secured by the equipment purchased, often with terms matching its useful life.
- Merchant cash advances and factoring: priced with factor rates or fees rather than APR, and usually far more expensive than a term loan.
Fees and the true cost
Many lenders charge origination, packaging or guarantee fees, sometimes deducted from the money you receive. If a $100,000 loan carries a 3% fee taken at closing, you receive $97,000 but repay the full $100,000 plus interest, so the effective rate is higher than the quoted 8%. Ask for the APR or the total cost in dollars, and compare offers on the same basis. For business products quoted with a factor rate, convert to an APR before comparing.
Can the business afford it?
Lenders look at the debt service coverage ratio (DSCR): annual cash available for debt payments divided by annual debt payments. A business that generates $36,000 a year of net operating income and takes on the $24,332 of yearly payments in the example has a DSCR of about 1.48. Many lenders want to see at least 1.25. Run the business loan calculator with several terms and check each payment against a conservative cash-flow forecast, not your best month.
Estimates for education only, not financial advice. Your lender’s figures are final.
Before you apply
Lenders usually ask for business and personal tax returns, recent bank statements, a profit and loss statement, a balance sheet and a description of how the money will be used. Newer businesses may need a business plan with cash-flow projections, and many lenders want a personal guarantee from owners. Your personal credit history often matters, especially for small or young companies. Having these documents ready speeds up approval and lets you collect several offers at the same time, which is the best way to get a competitive rate.
When the offers arrive, put each one into the business loan calculator with the same amount and term so you compare like with like. Check whether the rate is fixed or variable, whether there is a prepayment penalty, what collateral is required, and whether any fees are taken out of the loan amount. A loan with a slightly higher rate but no fees and no prepayment penalty can cost less overall if you expect to repay early. Keep the loan term no longer than the life of the asset you are financing.
Related converters and calculators
Related calculators:
- Loan calculator: loans
- Amortization calculator: schedules
- Merchant cash advance APR calculator: MCA cost
- Invoice factoring calculator: factoring
Sources
U.S. Small Business Administration: 7(a) loans.
Questions about this calculator
What is the payment on $100,000 at 8% for 5 years?
$2,027.64 a month.
What is the SBA 7(a) maximum?
$5 million.
Do fees change the true cost?
Yes. Fees raise the APR above the quoted rate.
What DSCR do lenders want?
Often at least 1.25.
Does it handle lines of credit?
No; it models fixed-rate term loans.
Check the assumptions and units before relying on a result. Financial, tax and health estimates do not replace advice for your individual circumstances.
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