Business Loan Calculator

What is a Business Loan Calculator?

A business loan calculator helps entrepreneurs and small business owners estimate the monthly payments, total interest, and overall cost of borrowing. Whether you're financing equipment, expanding operations, or launching a new venture, understanding your loan's true cost is essential for sound financial planning.

How Business Loan Payments Are Calculated

Most business loans use a standard amortization formula to determine equal monthly payments:

Where M is the monthly payment, P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments. In the early months, a larger portion of each payment goes toward interest. Over time, more goes toward reducing the principal balance.

Types of Business Loans

SBA Loans — Government-backed loans with competitive rates (typically 5–8%) and terms up to 25 years. Ideal for established businesses with good credit.

Term Loans — Traditional fixed-amount loans from banks or online lenders. Rates vary widely (6–25%) based on creditworthiness and lender type.

Equipment Financing — Loans secured by the purchased equipment. Often have lower rates since the equipment serves as collateral.

Business Lines of Credit — Flexible revolving credit for ongoing working capital needs. Interest is only charged on the amount drawn.

Understanding Origination Fees

Many lenders charge an origination fee (typically 1–6% of the loan amount) as a processing charge. This fee is usually deducted from the loan proceeds upfront. For example, a $100,000 loan with a 2% origination fee means you receive $98,000 but still owe $100,000. This calculator factors in origination fees so you can see the true cost of borrowing.

Benefits of Extra Payments

Making additional monthly payments beyond the minimum can dramatically reduce your total interest cost and shorten the loan term. Even small extra payments compound over time, since every extra dollar goes directly toward reducing the principal balance, which reduces future interest charges.

Tips for Getting the Best Business Loan

• Shop around — Compare rates from multiple lenders including banks, credit unions, and online lenders.
• Improve your credit score — A higher score typically means lower interest rates.
• Prepare financials — Have tax returns, profit/loss statements, and a business plan ready.
• Consider SBA loans — If you qualify, SBA-backed loans often offer the best terms.
• Read the fine print — Check for prepayment penalties, variable rate clauses, and hidden fees.

Frequently Asked Questions

How is a business loan monthly payment calculated?

Business loan monthly payments are calculated using the standard amortization formula: M = P × [r(1+r)^n] / [(1+r)^n - 1], where M is the monthly payment, P is the principal loan amount, r is the monthly interest rate, and n is the total number of payments. This formula ensures equal payments throughout the loan term.

What is a typical interest rate for a small business loan?

Small business loan interest rates typically range from 3% to 7% for SBA loans, 6% to 13% for traditional bank loans, and 7% to 25%+ for online lenders. The rate depends on your credit score, business revenue, time in business, collateral, and the type of loan.

What fees should I expect with a business loan?

Common business loan fees include origination fees (1–6% of loan amount), application fees, prepayment penalties, late payment fees, and annual fees for lines of credit. SBA loans may also include guarantee fees. Always factor these into your total cost of borrowing.

How does the loan term affect total cost?

A longer loan term reduces monthly payments but increases total interest paid. For example, a $100,000 loan at 7% costs about $23,000 in interest over 5 years, but about $50,000 over 10 years. Shorter terms save money on interest but require higher monthly payments.

What is an amortization schedule?

An amortization schedule is a table showing each loan payment broken down into principal and interest portions. Early payments are mostly interest, while later payments are mostly principal. This schedule helps business owners understand how their loan balance decreases over time.