How to use this business loan calculator
Enter the amount you want to borrow, the interest rate on the offer, and the term. The calculator returns your payment, total interest, and the effective APR once the origination fee is counted. Three optional inputs make it match real offers more closely:
- Origination fee. Most lenders deduct this from the money they send you, so a $100,000 loan with a 3% fee lands as $97,000 in your account while you repay the full $100,000. Enter it as a percentage or a flat dollar amount.
- Payment frequency. Banks and SBA lenders bill monthly. Many online lenders debit weekly, and the payment they quote is not comparable to a monthly figure until you annualize it.
- Extra payment. Anything you add above the scheduled payment goes to principal. The results show how many months you cut off and how much interest you avoid.
Open the amortization schedule to see the yearly split between principal and interest, or tick "show every payment" for the full table.
How the payment is calculated
Term loans use the standard amortization formula, which sets one fixed payment that covers all interest and pays the balance to exactly zero on the last payment:
Payment = P × i ÷ (1 − (1 + i)−n)
where P is the amount borrowed, i is the interest rate per period (annual rate ÷ 12 for monthly payments, ÷ 52 for weekly), and n is the number of payments.
Worked example: $100,000 at 8% for 5 years.
| Step | Value |
|---|---|
| Periodic rate i | 0.08 ÷ 12 = 0.0066667 |
| Number of payments n | 5 × 12 = 60 |
| (1 + i)−60 | 0.67121 |
| Payment | 100,000 × 0.0066667 ÷ (1 − 0.67121) = $2,027.64 |
| Total repaid | 60 × $2,027.64 = $121,658.40 |
| Total interest | $21,658.40 |
Interest is front-loaded. The first payment is $666.67 interest and $1,360.97 principal; in the final year, about 96% of what you pay goes to principal. That is why extra payments early in the loan are worth far more than the same dollars paid late.
At 0% (rare, but some equipment vendors offer it) the formula divides by zero, so the calculator switches to a straight-line payment of P ÷ n.
Small business financing types compared
The SBA figures below come from the program rules used by the SBA loan calculator, with the Wall Street Journal prime rate at 7.00% (effective September 17, 2026). Other products are priced by each lender, so the table shows how their cost is quoted rather than a rate; run any real offer through this calculator to get a comparable APR.
| Financing type | How the cost is quoted | Typical term | Best for |
|---|---|---|---|
| Bank term loan | Interest rate, often prime plus a margin, plus fees | 3 – 10 years | Established businesses with 2+ years of profitable statements |
| SBA 7(a) loan | Variable rate capped at Prime + 3.0 to 6.5 points by loan size (10.00% – 13.50% today) | Up to 10 years; 25 for real estate | Long terms and lower payments; slower to close |
| SBA 504 loan | Fixed debenture rate, 6.53% – 6.60% at the September 2026 pricing (CDC portion) | 10, 20, or 25 years | Real estate and heavy equipment |
| Online term loan | Interest rate or simple-interest "total payback", plus origination fee | Months to a few years | Fast funding, weaker credit, shorter needs |
| Business line of credit | Rate on the drawn balance, sometimes plus draw or maintenance fees | Revolving | Cash-flow gaps, seasonal inventory |
| Equipment financing | Rate or lease factor, secured by the asset | Matched to the asset's life | Vehicles, machinery, tech |
| Invoice factoring | Percentage of the invoice per 30 days outstanding | 30 – 90 days | B2B businesses waiting on receivables |
| Merchant cash advance | Factor rate (for example 1.3) on the amount advanced | Months, repaid by daily or weekly debits | Last resort; extremely expensive |
Merchant cash advances deserve a note. They are quoted as a factor rate, not an interest rate: borrow $50,000 at a 1.3 factor and you repay $65,000. That sounds like 30%, but repaid over six months the cost is far higher. To see it, enter a loan amount of $65,000 at 0% for 6 months with weekly payments, and a flat $15,000 origination fee. The calculator shows 26 weekly payments of $2,500 against the $50,000 you actually received, and an effective APR of 106.59%. (Ignore the total-cost line in this setup: the $15,000 "fee" is already inside the $65,000 of repayments.) Or use the SBA loan calculator to see what the same money costs with a government guarantee.
How fees change your real APR
An origination fee raises your cost twice: you receive less money, and you pay interest on money you never received. The effect depends heavily on the term.
| Loan | Note rate | 3% fee | Effective APR |
|---|---|---|---|
| $100,000 over 5 years | 8% | $3,000 | 9.30% |
| $100,000 over 2 years | 8% | $3,000 | 11.04% |
| $100,000 over 1 year | 8% | $3,000 | 13.77% |
| $100,000 over 6 months | 8% | $3,000 | 18.66% |
Same fee, same rate, and the true cost more than doubles as the term shrinks. Short-term online products almost always carry fees like this, which is why the headline rate on a 12-month loan rarely tells you what you are paying. The calculator solves for the APR by finding the discount rate at which your payments exactly repay the cash you actually received, which is the same method Truth in Lending disclosures use.
Other charges to add into the fee box if your offer includes them: packaging fees, SBA guarantee fees (see the SBA calculator, which computes these automatically), UCC filing fees, and closing costs on real-estate-secured loans. Do not add prepayment penalties or late fees; they are contingent, not guaranteed.
Debt service coverage ratio: the number lenders actually check
Before approving a loan, a lender asks one question: can this business make the payments with room to spare? The measure is the debt service coverage ratio:
DSCR = Annual net operating income ÷ Annual debt service (principal + interest on all business debt)
Most banks require 1.25× or higher. SBA lenders often accept 1.15×. Below 1.0× the business cannot cover its debt from operations at all.
Worked example. A landscaping company shows $180,000 of net operating income on its profit and loss statement (EBITDA is the usual proxy). It already pays $3,000 a month on a truck loan, and it wants the $100,000 loan above at $2,027.64 a month.
| Item | Annual amount |
|---|---|
| Existing truck loan | $36,000 |
| Proposed loan | $24,332 |
| Total debt service | $60,332 |
| Net operating income | $180,000 |
| DSCR | 2.98× |
That passes comfortably. Now suppose net operating income were $70,000 instead: DSCR falls to 1.16×, which a bank would decline and an SBA lender would scrutinise. To fix it you can borrow less, stretch the term (a 7-year term drops the payment to $1,558.62 and lifts DSCR to 1.28×), or pay off the truck loan first.
Lenders also review your balance sheet for the debt-to-equity ratio and liquidity, and they will pull business and personal credit. Having a current P&L and balance sheet ready is the single fastest way to speed up underwriting.
How extra payments shorten the loan
Because interest is charged on the outstanding balance, every extra dollar of principal you pay today removes all the future interest that dollar would have generated. On the $100,000 / 8% / 5-year loan:
| Extra per month | Payoff | Interest paid | Saved |
|---|---|---|---|
| $0 | 60 months | $21,658 | — |
| $250 | 53 months | $18,707 | $2,951 |
| $500 | 47 months | $16,477 | $5,181 |
| $1,000 | 38 months | $13,329 | $8,329 |
The savings look modest on a short loan and become large on long ones: adding $500 a month to a 25-year, $500,000 commercial mortgage at 7.5% saves roughly $190,000. Before you prepay, check the agreement. SBA 7(a) loans with terms of 15 years or more charge a prepayment penalty in the first three years if you pay off more than 25% of the balance. Some online lenders quote a fixed total repayment amount, meaning early payment saves nothing; ask explicitly whether interest is "pre-computed" or whether they offer a prepayment discount.
Red flags in a loan offer
- The rate is a factor rate, "simple interest", or "cents on the dollar." These are not APRs. Convert them with this calculator before comparing.
- Daily or weekly debits on a multi-year term. Legitimate for short products; on longer terms it usually signals a lender pricing for high default risk.
- Fees above 5% of the loan, or fees that are vague ("processing", "underwriting", "platform").
- Confession of judgment or personal guarantee with no cap buried in the documents. Have a lawyer read anything you do not understand.
- Pressure to close today. Any lender whose offer expires in hours is not giving you time to compare.
- No amortization schedule on request. Every legitimate lender can produce one. If yours cannot, generate it here and ask why the numbers differ.
- Stacking. Taking a second cash advance to service the first. If the business needs new debt to make the payments on existing debt, more borrowing will not fix the cash-flow problem; compare total weekly debits with weekly revenue before signing.
What the calculator assumes
- A fixed rate for the whole term. Variable-rate loans, including most SBA 7(a) loans, change payment when the base rate moves; model a rate change by rerunning the remaining balance at the new rate.
- Fully amortizing payments. There is no balloon payment, interest-only period, or draw period, and the final payment is adjusted by a few cents so the balance ends at exactly zero.
- Interest charged per period on the opening balance (annual rate ÷ 12 or ÷ 52), not daily interest.
- Fees paid at closing. The origination fee is treated as deducted from what you receive. Prepayment penalties, late fees and ongoing account fees are not included.
- Weekly terms are converted from months at 52 payments a year, so a 6-month weekly loan has 26 payments.
Get your numbers lender-ready
Figure out whether the loan will pay for itself with the profit margin calculator, and get your financials lender-ready with the free profit and loss and balance sheet templates. If your business qualifies, the SBA loan calculator shows what the same loan costs under the 7(a) and 504 programs, including the guarantee fee.