Business Loan Calculator
Calculate monthly payments, total interest, and amortization for business loans.
This business loan calculator returns the monthly payment, total interest, and total cost of a fixed-rate term loan from the amount, the note rate, and the term. Turn on the amortization schedule to see how much of each payment is interest in year one — usually the number that decides whether the loan pays for itself.
Business lending is priced differently from consumer lending. The note rate is one line item, origination and guarantee fees move the real cost, and a term loan is only one of four structures you will be offered. Below: the payment math, the term trade-off, and what actually changes the rate you are quoted.
How to calculate a business loan
- Enter the amount financed — the principal, not the whole project cost, if you are contributing cash.
- Enter the note rate as an annual percentage.
- Set the term in years. Business term loans commonly run 3 to 10.
- Monthly payment = P x r(1+r)^n / ((1+r)^n - 1), with r = rate/12 and n = years x 12. At $50,000, 7.5%, 5 years: $1,001.90.
- Total interest = payment x n - P = $60,114 - $50,000 = $10,114.
Example
$50,000 at 7.5% over 5 years: $1,001.90 a month, $60,114 repaid, $10,114 of interest. Stretch to 7 years and the payment falls to $766.91 while total interest rises to $14,421 — $4,307 more for $235 a month of breathing room.
Business loan payment formula
M = P x r(1+r)^n / ((1+r)^n - 1), where r = annual rate / 12 and n = years x 12. Total interest = M x n - P.
How to use this calculator
- Enter principal, note rate, and term.
- Switch the amortization schedule on to see principal and interest split per period.
- Compare terms by changing only the years. The payment difference is what cash flow buys you.
- Add 1-5% origination to the rate if you want the effective cost; the calculator works on the note rate.
What each term costs
The payment falls 74% from the 2-year to the 10-year loan while total interest more than quintuples. Shorter is cheaper only if cash flow can carry it — a missed payment costs far more than the interest ever will.
| Term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 2 years | $2,249.98 | $4,000 | $54,000 |
| 3 years | $1,555.31 | $5,991 | $55,991 |
| 5 years | $1,001.90 | $10,114 | $60,114 |
| 7 years | $766.91 | $14,421 | $64,421 |
| 10 years | $593.51 | $21,221 | $71,221 |
$50,000 at a 7.5% note rate
The rate is not the cost
A business loan is quoted with a note rate, but what you repay includes fees the note rate does not capture.
Origination: typically 1-5% of principal, often deducted from the proceeds. Borrow $50,000 with a 3% fee and you receive $48,500 while repaying on $50,000 — the effective rate is roughly 1.5 percentage points higher than the quote.
Guarantee fee: on SBA 7(a) loans the SBA charges a fee on the guaranteed portion, usually passed through to the borrower. It is reduced or waived on smaller loans.
Closing costs: appraisal, UCC filing, business valuation, legal review. On a secured loan these can add several thousand dollars.
Prepayment penalties: some term loans charge them in the first 1-3 years, which quietly removes the refinance option you were counting on.
Term loan, line of credit, or SBA?
- Term loan — a fixed sum on a fixed schedule. Right for equipment, build-outs, and acquisitions with a defined payback.
- Line of credit — revolving, drawn as needed. Right for working capital and seasonal swings; the rate is usually variable.
- SBA 7(a) — longer terms and lower down payments, at the cost of paperwork, a guarantee fee, and a slower close.
- Equipment financing — the machine is the collateral, so rates are lower and the term tracks its useful life.
- Merchant cash advance — priced as a factor rate, not an APR. The most expensive option on this list by a wide margin.
What actually moves your rate
Lenders price risk. For a small business the inputs are roughly: time in business (two years is the usual line between startup and bankable), revenue and profitability, the owner's personal credit — most banks underwrite the owner as much as the company — existing debt service, and collateral.
DSCR is the one number to compute before applying: EBITDA divided by total annual debt service. Most lenders want 1.25 or better. A loan that pushes DSCR below that gets declined regardless of the rate you were quoted.
Should you take the longer term?
A longer term lowers the payment and raises the total cost. The right question is what the borrowed money earns. If the equipment or the hire it funds returns more than the effective APR, the longer term wins on return on capital even though it costs more in interest.
If the loan is covering a shortfall rather than funding growth, the longer term only lets an unprofitable decision survive longer.
A quick check: total interest as a percentage of principal. On the 5-year example that is 20%; on the 10-year, 42%. If the asset will not outlive the term, the term is too long.
Common mistakes
- Comparing offers by monthly payment instead of effective APR including fees.
- Borrowing the full project cost and keeping no cushion for the first slow quarter.
- Signing a variable-rate line for a long-term need. The rate reset is the risk, not the payment.
- Ignoring the personal guarantee. Most small business loans are personally guaranteed, so the company structure does not cap your exposure.
FAQ
How is a business loan payment calculated?
Standard amortization: P x r(1+r)^n / ((1+r)^n - 1), with r the monthly rate and n the number of months. Fees are not in that formula and have to be added separately.
What is a typical business loan rate?
Bank term loans commonly price in the 7-12% range for established businesses, higher for startups and unsecured lending. SBA loans are usually priced off prime plus a spread.
How much can I borrow?
Usually a function of revenue, time in business, and DSCR. Many lenders cap at 10-20% of annual revenue; SBA 7(a) caps at $5 million.
What is DSCR?
Debt service coverage ratio: EBITDA divided by annual debt service. Lenders typically want 1.25x or higher before approving a term loan.
Is a 10-year business loan a good idea?
Only if the asset or the growth it funds lasts at least that long. On a $50,000 loan at 7.5%, interest roughly doubles versus a 5-year term.
Do business loans require collateral?
Not always. Unsecured loans and smaller SBA loans may not, but most will still require a personal guarantee from the owner.
Can I pay off a business loan early?
Often yes, but check the prepayment clause. Some term loans charge a penalty during the first 1-3 years.
Business loan or business line of credit?
A term loan disburses a fixed amount on a schedule; a line is revolving and you pay interest only on what is drawn.
Are business loan interest payments tax deductible?
Interest on a business loan is generally deductible as an ordinary business expense. Confirm the treatment with an accountant, since it depends on entity type and use of funds.