Business Loan Calculator

About the Business Loan Calculator

A business loan calculator helps entrepreneurs, small business owners, and finance managers evaluate the cost of business financing — showing monthly payments, total interest over the loan life, amortisation schedule, and the effective annual cost of different loan products. Business financing comes in many forms: term loans (fixed payments over a set period), SBA loans (government-backed at preferred rates), equipment financing, business lines of credit, merchant cash advances, and invoice factoring — each with very different true costs that this calculator helps you compare on an equal basis. Our free business loan calculator works for any loan amount, term, and interest rate, converts between APR (Annual Percentage Rate) and factor rates (used by many alternative lenders), and calculates the effective APR for merchant cash advances that are repayable as a percentage of daily revenue rather than fixed monthly payments. This gives you the tools to avoid the surprisingly expensive trap of high-fee short-term business financing.

How It Works

Standard term loan: Monthly payment = P x [r(1+r)^n] / [(1+r)^n - 1], where P = principal, r = monthly rate, n = months. Example: $75,000 loan at 8.5% APR for 60 months: monthly rate = 0.085/12 = 0.00708. Payment = 75,000 x [0.00708 x (1.00708)^60] / [(1.00708)^60 - 1] = $1,539/month. Total paid: $1,539 x 60 = $92,340. Total interest: $17,340. Factor rate conversion (merchant cash advances): a $50,000 advance with a 1.35 factor rate means total repayment = $50,000 x 1.35 = $67,500 ($17,500 fee). If repaid over 9 months: approximate APR = (17,500/50,000) / (9/12) x 100 = 35% x (12/9) = approximately 47% effective APR — dramatically higher than the factor rate makes it appear.

Tips & Best Practices

• ✓Compare APR, not just rate or payment: merchant cash advances and short-term business loans often disguise extremely high effective APRs behind factor rates or daily payment structures. Always convert to APR for fair comparison.
• ✓SBA loan advantages: SBA 7(a) loans offer longer terms (up to 25 years for real estate, 10 years for working capital), lower rates, and higher loan amounts than conventional small business loans. The application process is longer but the economic terms are typically far better.
• ✓Business credit score: your business credit score (Dun & Bradstreet PAYDEX, Experian Business, Equifax Business) affects loan approval and rate independently of your personal credit score. Building business credit before you need financing is valuable.
• ✓Collateral and personal guarantees: most small business loans under 5 years old require a personal guarantee from all owners with 20%+ ownership. Be aware that your personal assets are at risk if the business defaults.
• ✓Debt service coverage ratio (DSCR): lenders typically require DSCR above 1.25, meaning your net operating income must be at least 125% of your annual debt payments. Use the loan calculator to verify your projected DSCR before applying.
• ✓Equipment financing versus term loan: equipment loans are typically self-collateralised (the equipment secures the loan), offer better rates than unsecured business loans, and the equipment can often be depreciated for tax purposes via Section 179.
• ✓Prepayment penalties: some business loans impose fees for early repayment. Always check the prepayment terms if you might pay off the loan before maturity from business cash flows or a future sale.
• ✓Line of credit versus term loan: lines of credit are flexible (borrow as needed, repay, reborrow) and you pay interest only on outstanding balances. Term loans provide lump-sum financing at potentially better rates. Use the loan type that matches your cash flow pattern.

Who Uses This Calculator

Small business owners comparing loan offers from multiple banks, credit unions, online lenders, and SBA-approved lenders to find the lowest total cost. Entrepreneurs modelling whether a specific purchase or expansion can be financed profitably given their current revenue and margins. Finance managers presenting financing scenarios to business owners or board members. Startups evaluating equipment financing versus leasing for capital expenditures. Business advisors and accountants helping clients structure financing for acquisitions.