Business Loan Calculator
The Business Loan Calculator calculates the payback amount and the total costs of a business loan. The calculator can also take the fees into account to determine the true annual percentage rate, or APR for the loan. The APR gives borrowers a more accurate assessment of a loan's actual cost.
Result
Loan Breakdown
Amortization Schedule
| Payment # | Payment | Principal | Interest | Balance |
|---|
| Payment Period | Total Payments | Principal | Interest | Ending Balance |
|---|
Frequently Asked Questions
A business loan is money borrowed by a business entity from a lender (bank, credit union, or alternative lender) that must be repaid with interest. Business loans can be used for:
- Startup capital and initial operations
- Equipment and machinery purchases
- Inventory and working capital
- Expansion and growth initiatives
- Debt consolidation
- Cash flow management
APR (Annual Percentage Rate) is the true annual cost of borrowing expressed as a percentage. It includes:
- Base interest rate
- Origination fees
- Documentation fees
- Other lender charges
Why it matters: APR provides a complete picture of the loan's cost, making it easier to compare different loan offers accurately.
APR is calculated by finding the discount rate that equates the present value of all payments (including fees) to the loan principal. The formula considers:
Where:
- PV = Present value (loan amount)
- C = Periodic cash flows (payments)
- n = Number of periods
Monthly payments are calculated using the standard amortization formula:
Where:
- M = Monthly payment
- P = Principal (loan amount + fees)
- r = Monthly interest rate (annual rate ÷ 12 ÷ 100)
- n = Number of monthly payments
Common business loan fees include:
- Origination Fee: 1-10% of loan amount, covers loan processing
- Documentation Fee: Fixed fee for paperwork and processing
- Underwriting Fee: Cost to review and approve the application
- Closing Fee: Fee for loan closing costs
- Prepayment Penalty: Charged if you pay off early (not always included)
- Annual Maintenance Fee: Ongoing account fee charged yearly
Amortization is the process of paying off a loan through regular, equal payments over a set period. An amortization schedule shows:
- Payment Amount: The regular payment due
- Principal Portion: Amount reducing the loan balance
- Interest Portion: Amount paid as interest
- Remaining Balance: Outstanding loan amount
Key insight: Early payments are mostly interest; later payments are mostly principal.
Interest Rate: The percentage charged on the principal only. Does not include fees.
APR: Includes interest rate plus all fees spread across the loan term.
Example: A 10% interest rate with a 5% origination fee might result in an 11-12% APR depending on the loan term.
Best practice: Always compare APRs when evaluating loan offers for the most accurate comparison.
Most business loans allow early repayment. Benefits include:
- Save Interest: Significantly reduce total interest paid
- Improve Cash Flow: Free up money for other business needs
- Reduce Debt: Lower debt obligations faster
- Build Credit: Show responsible payment history
Important: Check your loan agreement for prepayment penalties. Some lenders charge fees for early payoff.