Business Loan Calculator đŧ
Calculate the fixed monthly payment and total cost of a **Term Loan** or determine the effective interest rate when fees are included.
Business Loan Details
Key Features of This Calculator
- **Flexible Repayment:** Supports monthly, quarterly, and weekly payment schedules.
- **All-in Cost:** Includes upfront fees to calculate the true cost of borrowing.
- **Effective APR:** Provides the Annual Percentage Rate to help compare loans with different fee structures.
The Business Loan Calculation Method
The calculations use the standard amortization formula, adjusted for the chosen repayment frequency ($k$).
Scheduled Payment ($M$)
The payment amount is calculated to fully amortize the principal over the term.
M = P [ i(1 + i)âŋ / ( (1 + i)âŋ - 1 ) ]
Where:
P = Principal
r = Annual Rate (R / 100)
k = Repayment Frequency (e.g., 12 for monthly)
i = Periodic Rate (r / k)
n = Total Payments (T Ã k)
Effective APR Calculation
The effective APR accounts for the fees by treating the *net* amount received as the true principal, but the *gross* amount as the loan amount for payment calculation. We simplify by finding the rate that makes the total future cost equal to the total future repayment, but on the net proceeds, not just the principal.
The calculation is an approximation derived from the total cost over the term.
Choosing the Right Business Financing
Business financing comes in many forms, but the most common for fixed capital needs is the **Term Loan**. This calculator focuses on the cost of a standard amortizing term loan, where you receive a lump sum and pay it back with interest over a fixed period.
Types of Business Loans (H4 for deep dive)
- **Term Loans:** Fixed payments over a set period. Ideal for major equipment purchases or expansion projects.
- **Business Lines of Credit:** Revolving credit (like a credit card) used for working capital and inventory, with interest paid only on the amount drawn.
- **SBA Loans:** Government-backed loans (often Term Loans) with lower rates and longer terms, but slower application process.
- **Equipment Financing:** Secured loans used specifically to purchase business equipment.
The Importance of Effective APR (H4 for key concept)
When comparing loan offers, the nominal interest rate (the advertised rate) can be misleading due to **upfront fees** (origination fees, closing costs). The **Effective APR** converts the total cost (interest + fees) into a single annual rate, giving you the most accurate tool for comparing different loan products.