Business Loan Calculator

How much will your business loan payments be? Before applying, use this business loan calculator to see interest, total amount paid and amortization.

A business loan can open a lot of doors for your business. Think new equipment, day-to-day operation costs, and expansion.

But will you be able to make the payments?

With this business loan calculator, you'll know:

1. How much your monthly payment will be
   
2. How much you'll pay in total interest
   
3. How much of your monthly payments go to interest vs. principal

Find out everything you need to know about business loans in this guide. Plus, review what fees you can expect to pay and popular business financing options to choose from.

How to Calculate a Business Loan

Before you apply for business loans, it helps to know what you're getting into. The calculator above breaks down your payment schedule and how much total interest you'll pay.

Here's how it works:

1. First, enter your desired Loan Amount that you want to borrow.

2. Next, add the Annual Interest Rate that the lender will charge on the loan.

   If you've shopped around with specific lenders, enter the rate you've been quoted. If you haven't started your search yet, enter between 3%-7%.

3. Then, enter the Term of the loan in years. This is how long you'll be paying off the loan.

4. Finally, you have the option to enter any Extra Payments. This is money that you can pay on top of the minimum payment.

   Try leaving this blank at first. That way, you can see how much your minimum payment ends up being and decide whether you'll be able to pay more.

Hit "Calculate" to see your Monthly Payment amount and the Total Months you'll be making the payment.

You'll also see your Total Payment amount displayed in a pie chart. This tells you how much of your payment total went toward the principal vs. the interest.

For more detail, check out the amortization table below the pie chart. This breaks down how each monthly payment is split between principal and interest.

Business Loan Fees

Like most loans, business loans come with several fees that you should be prepared for. Here's what you should know:

Fees Charged at the Beginning of the Loan

• Origination fee: Lenders charge this for processing your loan application and to pay for any costs associated with verifying your info (like a background check). It is usually a percentage of the loan (1%-6%)

• Packaging fee: Similar to an origination fee. SBA lenders and lending platforms will usually charge a packaging fee instead of an origination fee.

• Referral fee: Loan "marketplaces" may charge this for referring your loan application to lenders.

• SBA loan guarantee fee: The SBA charges this fee because they guarantee lenders that 70%-80% of the loan will be paid back, even if you default on the loan. This is between 2% and 4%.^[1]

• Underwriting fee: Lenders charge this to pay for the time and labor associated with underwriting your loan application.

Fees Charged Over the Life of the Loan

• Service or processing fee: Lenders charge this to cover the cost of processing your payments and managing the loan. It can be charged monthly as a percentage of your monthly payment or yearly as a percentage of the total loan amount.

• Non-sufficient funds fee: Charged if your loan payment doesn't go through. It's usually a flat fee, $15 - $40.

• Late payment fee: Charged if your payment is made past the due date (or grace period). It can be a flat fee ($10 - $35) or a percentage of your outstanding balance (2%-5%).

• Wire transfer fee: Lenders charge this if you make a payment via wire transfer. It's usually a flat fee, $10 - $25.

• Prepayment fee: Some lenders charge this if you pay your loan off early because they lose out on your interest payments. Check any loan contract for mention of prepayment fees.

4 Main Types of Business Loans

The four business loans below represent the majority of financing that small businesses get. Review the details to see which works best for your business.

SBA Loan
An SBA loan is backed by the Small Business Administration, an agency of the U.S. Government.

Borrowers apply for an SBA loan with private lenders and are usually secured, meaning they require collateral. The three main types of SBA loans are:

• 7(a) Loans: SBA's primary loan program; loan amounts are usually between $350K to $5M.
  
• Microloans: Small loans, between $10K and $50K; these loans are ideal for startups who need a modest boost.
  
• CDC/504 Loan: Long-term, fixed-rate financing for major fixed assets (i.e., equipment or real estate).

Business Line of Credit
Like a credit card, a business line of credit only requires you to pay interest on the amount of money you borrow, not your entire credit limit.

You use up and repay the borrowed money as needed. Business credit lines range from $1K to $250K and do not require collateral. They are offered by banks or online lenders.

Term Loan
Term loans are paid back in regular installments, also called terms. They are offered by banks and online lenders for amounts ranging from $25K to $500K in terms of 1-5 years.

These are generally easy to qualify for, as long as your business has decent credit and generates revenue.

Working Capital Loan
These are short-term business loans meant to finance day-to-day business operations, as opposed to major fixed assets like equipment or real estate.

Working capital loans are usually offered by big national banks and require an excellent credit history.

Bottom Line

Before applying for business loans, you'll want to be sure you can make the payments. Utilize a calculator like the one above to ensure that a loan fits into your business finances.

As always, a good business credit score and organized finances will increase your chances of being approved for a good, lower-interest loan. And don't be afraid to shop around for the best rates.

References