Business Loan Calculator

A business loan is a lump sum of capital provided by a lender — typically a bank, credit union, or online lender — that a business borrows and repays over time with interest. Business loans are used for a wide range of purposes: purchasing equipment, expanding to new locations, funding inventory, refinancing existing debt, covering working capital gaps, or financing acquisitions. Unlike equity financing, debt financing does not dilute ownership, but it creates a legal obligation to repay regardless of business performance.

The Annual Percentage Rate (APR) is the true annual cost of borrowing, including both the nominal interest rate and all fees expressed as an annual percentage. APR allows comparison across loans with different fee structures and compounding frequencies. A loan with a 7% interest rate but 2% origination fee has a higher effective APR than its nominal rate suggests, especially for shorter loan terms where fees constitute a larger portion of the total cost.

The standard business loan amortization formula calculates the monthly payment as: Payment = P × [r(1+r)^n] ÷ [(1+r)^n − 1], where P is the loan principal, r is the monthly interest rate (APR ÷ 12), and n is the total number of monthly payments. This formula produces a fixed monthly payment where early payments are mostly interest and later payments are mostly principal — a pattern called negative amortization in reverse.

Step 1: Enter loan amount. Input the total amount you plan to borrow. For equipment purchases or real estate, this is the purchase price minus any down payment. For working capital, it is the amount needed to fund operations.

Step 2: Enter the APR. Use the annual percentage rate quoted by the lender. If you only have a monthly rate, multiply by 12 to approximate APR (note: this underestimates the true APR due to compounding). Current business loan APRs generally range from 6–12% for strong credit profiles, higher for SBA loans (8–13%), and 20–50%+ for alternative online lenders.

Step 3: Set the loan term. Longer terms reduce monthly payments but increase total interest paid. Shorter terms increase monthly payments but reduce total cost. The optimal term depends on your cash flow capacity and how long the funded asset will generate returns.

Step 4: Enter origination fee. Most business loans carry an origination fee of 0.5–3% of the loan amount, charged upfront. Enter this percentage to see the fee impact on total loan cost. Some lenders roll the origination fee into the loan balance, increasing your effective borrowing amount.

Step 5: Compare loan types. The comparison table shows monthly payments, total interest, and total cost for all four loan types (Term Loan, SBA 7(a), SBA 504, Line of Credit) with your inputs, making it easy to see trade-offs between structure and cost.

• Debt service coverage: Lenders require a Debt Service Coverage Ratio (DSCR) of at least 1.25: operating income must be at least 1.25 times the annual loan payment. Use the monthly payment result to verify your projected income can service the debt with adequate cushion.
• Equipment ROI analysis: Compare the monthly loan payment against the incremental revenue or cost savings the equipment generates. If the equipment saves $5,000/month and the loan payment is $3,200/month, the net benefit is $1,800/month and the investment pays off even after interest costs.
• Refinancing evaluation: Model whether refinancing an existing loan at a lower APR reduces total cost sufficiently to justify any prepayment penalties and new origination fees on the replacement loan.
• SBA loan feasibility: SBA 7(a) loans offer favorable rates and long terms (up to 25 years for real estate) but require extensive documentation and longer approval times. Compare SBA total cost against conventional loans to determine whether the lower rate justifies the process complexity.
• Working capital management: Use a line of credit for short-term cash flow gaps instead of a term loan, as you only pay interest on drawn amounts. The calculator's line-of-credit mode shows the interest-only payment on your credit limit.
• Loan comparison across lenders: Enter quotes from multiple lenders with their respective APRs and fees to identify the lowest total cost of borrowing, not just the lowest monthly payment or interest rate.