Business Loan Calculator

Calculate monthly payments, total interest, and the effective APR for business loans including origination fees. Compare SBA loans, term loans, and other business financing options.

Business Loan Details

$
%
yrs
%

Typically 0.5-5% of the loan amount

Enter your business loan details

Calculate payments, total cost, and effective APR

Related Calculators

Pro Tip

When comparing business loan offers, always look at the effective APR rather than the stated interest rate. A loan with a lower rate but high origination fees can cost more than one with a slightly higher rate and no fees.

Compare with APR Calculator →

Popular Tools

Understanding Business Loans

Business loans provide capital for companies to fund operations, purchase equipment, expand facilities, or manage cash flow. They come in several forms, each designed for different needs and situations. Understanding the differences helps you choose the most cost-effective financing for your business.

SBA Loans are partially guaranteed by the U.S. Small Business Administration, which reduces lender risk and allows for lower interest rates (typically 5-10%) and longer repayment terms (up to 25 years for real estate). The most popular programs are the SBA 7(a) loan for general business purposes and the SBA 504 loan for fixed assets. However, SBA loans require extensive documentation, strong credit, and processing times of 30-90 days.

Term Loans provide a lump sum of capital repaid in fixed monthly installments over a set period (typically 1-10 years). They are best for one-time investments like equipment purchases, renovations, or business acquisitions. Rates vary from 6% for established businesses with excellent credit to 30%+ for startups or businesses with weaker financials.

Business Lines of Credit work like a credit card -- you are approved for a maximum amount and only pay interest on what you draw. Lines of credit are ideal for managing cash flow fluctuations, covering seasonal expenses, or handling unexpected costs. Rates are typically higher than term loans but you only pay for what you use.

Origination fees are upfront charges that lenders assess to process the loan, typically ranging from 0.5% to 5% of the loan amount. These fees significantly impact the true cost of borrowing. A $250,000 loan with a 2% origination fee means you pay $5,000 upfront but still owe the full $250,000 plus interest. The effective APR accounts for this cost difference and should always be used when comparing loan offers.

When evaluating business loans, consider not just the interest rate but also the origination fee, prepayment penalties, collateral requirements, and your actual cash need. Getting pre-qualified with multiple lenders lets you compare true costs before committing.

Business Loan Formulas

Monthly Payment (Standard Amortization)

PMT = P × [r(1+r)n] / [(1+r)n − 1]

Where:

PMT = Monthly payment amount

P = Loan principal (full amount borrowed)

r = Monthly interest rate (annual rate / 12)

n = Total number of monthly payments (years x 12)

Example

For a $250,000 business loan at 7.5% for 10 years with a 2% origination fee:

  • • Monthly rate = 7.5% / 12 = 0.00625
  • • Number of payments = 10 x 12 = 120
  • • PMT = $250,000 x [0.00625 x 1.00625^120] / [1.00625^120 - 1]
  • • PMT = $2,967.87 per month
  • • Total interest = ($2,967.87 x 120) - $250,000 = $106,144.40
  • • Origination fee = $250,000 x 2% = $5,000
  • • Total cost = $356,144.40 + $5,000 = $361,144.40
  • • Effective APR = ~7.96% (higher than stated 7.5% due to fee)

Frequently Asked Questions

What is the difference between an SBA loan and a conventional business loan?
SBA loans are partially guaranteed by the U.S. Small Business Administration, which reduces lender risk. This results in lower interest rates (typically 5-10%), longer repayment terms (up to 25 years), and lower down payments. However, SBA loans require more paperwork, take longer to process (30-90 days), and have strict eligibility requirements. Conventional business loans are faster to obtain but generally carry higher rates and shorter terms.
How does the origination fee affect my effective APR?
The origination fee is deducted from your loan proceeds, meaning you receive less than the full loan amount but still repay the full amount plus interest. This increases your effective cost of borrowing. For example, a $250,000 loan at 7.5% with a 2% origination fee means you receive $245,000 but pay back $250,000 plus interest, pushing the effective APR above the stated 7.5% rate. Always compare loans using APR, not just the interest rate.
What is the difference between a term loan and a line of credit?
A term loan provides a lump sum of capital repaid in fixed monthly installments over a set period. It is best for one-time investments like equipment or expansion. A line of credit gives you access to funds up to a limit, and you only pay interest on what you draw. Lines of credit are ideal for managing cash flow, seasonal expenses, or unexpected costs. Term loans typically have lower rates but less flexibility.
What credit score do I need for a business loan?
Most traditional lenders require a personal credit score of at least 680 for business loans, with the best rates reserved for scores above 750. SBA loans typically require 680+. Online lenders may approve scores as low as 500-600 but charge significantly higher rates. Your business credit score, revenue, time in business, and collateral also factor into approval and pricing.
Can I pay off a business loan early?
Most business loans allow early payoff, but some include prepayment penalties (typically 1-5% of the remaining balance, declining over time). SBA 7(a) loans charge a prepayment penalty of up to 5% if paid off within the first 3 years. Always check your loan agreement for prepayment terms before signing. Paying early saves interest since interest is calculated on the declining balance.