How to use the business loan calculator
Use one written proposal at a time. Enter the contract interest rate that accrues on the balance, not an APR or factor rate.
The cash-flow fields are optional, but they're the useful part. Enter the cash the business has left each month after normal operating costs and before debt payments, and list current loan payments separately.
- Enter the loan amount, fixed annual interest rate and term in years.
- Enter lender and closing fees, and choose whether they're deducted, added to the loan or paid upfront.
- Add interest-only months if the proposal includes them.
- Enter monthly cash available for debt payments and your existing monthly debt service.
- Add extra monthly principal if the note allows early payment.
- Calculate and review net proceeds, the payment, coverage, total cost and the schedule.
Business loan example: $50,000 over five years
Take a $50,000 term loan at 9.75% for five years with a $1,000 fee deducted at funding. The payment is $1,056.21 a month and interest totals $13,372.73. The business gets $49,000, so interest plus the fee is $14,372.73.
Now add cash flow. With $2,500 a month available and no other debt, the new loan is covered about 2.37 times. Add $600 of existing loan payments and combined coverage drops to about 1.51 times, with $843.79 left each month.
| Fee treatment | Net proceeds | Monthly payment | Total borrowing cost |
|---|---|---|---|
| Deducted from proceeds | $49,000.00 | $1,056.21 | $14,372.73 |
| Added to loan balance | $50,000.00 | $1,077.34 | $14,640.19 |
| Paid separately upfront | $50,000.00 | $1,056.21 | $14,372.73 |
Business loan payment formula
The payment is standard fixed-rate amortization on the financed balance. If the loan starts with interest-only months, those months stay inside the total term, so the balance is repaid over fewer payments afterward. Coverage ratios divide the cash you enter by the payments.
Financed balance P = loan amount + fees added to the loanMonthly rate r = annual rate / 100 / 12Interest-only payment = P x rAmortizing payment = P x r / (1 - (1 + r)^(-n)), n = term months - interest-only monthsCombined coverage = monthly cash available / (existing debt service + new payment)Total borrowing cost = interest paid + fees
SBA loan calculator: estimating a 7(a) loan
An SBA 7(a) loan is made by a participating lender with an SBA guarantee. If the loan is a fixed-rate monthly term loan, the calculator handles it. Enter the amount, the rate your lender quotes, the term and the fees on your offer.
SBA sets the outer limits. 7(a) loans go up to $5 million. Maturities are generally 10 years or less for working capital, up to 10 years for equipment (longer if its useful life supports it) and up to 25 years for real estate. Rates are negotiated but capped at a base rate plus a spread that depends on loan size.
Term changes the payment a lot. Say a lender quotes 10.5% on $250,000. Over 10 years the payment is $3,373.37. Over 25 years, as for a real estate loan, it's $2,360.45, but interest climbs from $154,804.99 to $458,136.28.
Equipment loan calculator example
Equipment loans work best when the term matches how long the equipment earns money. Say you finance a $120,000 machine at 9%. Over five years the payment is $2,491.00 with $29,460.16 of interest. Over seven years it's $1,930.69 a month, but interest grows to $42,177.91.
If the machine will need replacing in five years, the seven-year loan leaves you paying for it after it's gone. Enter your own quote and test both terms against your monthly cash.
| Term | Monthly payment | Total interest | Payment per $1,000 |
|---|---|---|---|
| 5 years | $2,491.00 | $29,460.16 | $20.76 |
| 7 years | $1,930.69 | $42,177.91 | $16.09 |
Interest-only months and extra principal
Interest-only months lower the early payment but don't touch the balance. On the $50,000 example, six interest-only payments are $406.25 each. Then the full balance is repaid over the remaining 54 months at $1,147.55, and total interest rises to $14,405.42.
Extra principal does the reverse. Check the note first. SBA says 7(a) loans with maturities of 15 years or more can carry a prepayment penalty. It applies if you prepay 25% or more of the balance in the first three years. The fee is 5% of the prepayment in year one, 3% in year two and 1% in year three.
What this estimate doesn't cover
The calculator is for fixed-rate monthly term loans. It doesn't check eligibility, quote rates, or calculate a lender's debt service coverage ratio. Lenders measure cash flow their own way and may adjust earnings, average past periods or count owner debts.
Be cautious with anyone who guarantees financing in exchange for an upfront payment. The FTC calls that a sign of an advance-fee scam.
- Lines of credit, merchant cash advances and factor-rate products follow different math.
- Variable rates, balloon payments and staged draws aren't modeled.
- SBA guaranty fees and lender fees should come from your actual offer.
- Collateral, guarantees, covenants and taxes are outside the calculation.
Sources
These SBA, Federal Reserve and FTC resources cover loan programs, 7(a) terms, small-business financing and fraud warnings.