Business Loan Calculator

The quoted rate is not the cost of the money

If a fee is deducted from the advance, you receive less than you borrowed but repay the whole amount with interest — so the effective rate is higher than the one on the term sheet. If the fee is financed instead, the payment rises but the cash arrives intact. The true APR above is derived from the actual cash flows: what lands in the account, against every payment you make.

Coverage matters more than the rate

Lenders size business debt on whether the business can service it, usually as debt service coverage — cash available for debt divided by the payment. Anything under 1.0 means the loan consumes more than the business generates. Lenders commonly want 1.25 or better, so there is room for a bad quarter. A cheap loan the business cannot cover is worse than an expensive one it can.

Term length cuts both ways

Stretching the term lowers the payment and lifts coverage, which is how marginal deals get approved — and it raises total interest, sometimes substantially. Match the term to what the money buys: equipment with a ten-year life can carry a long loan, while working capital that turns over in months should not still be on the books in year seven.

Government-backed programs

Loans guaranteed under Small Business Administration programs carry a guaranty fee based on the guaranteed portion and the size of the loan, in addition to the lender's own packaging fee. The trade is a lower rate cap and a longer term against more paperwork and a slower close. Enter the guaranty fee separately above so it shows up in the APR rather than disappearing into the closing statement — that is the point at which these programs are usually mis-compared with a fast online offer.

What is not on this page

This models an amortizing term loan. It does not model a revolving line of credit, where you pay interest only on what is drawn, nor merchant cash advances, which are priced as a factor rate on future receipts and are usually far more expensive than their headline suggests — if an offer quotes a "factor" rather than a rate, convert it to an APR before comparing it with anything here. Prepayment penalties, covenants and personal guarantees are terms rather than arithmetic, and they belong in the same conversation as the number above.

Frequently Asked Questions