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Business Loan Calculator

Updated · By the CalculatorDash editorial team · How we check our maths

Quick answer

A $100,000 business loan at 10% over 5 years costs about $2,125 a month and $27,500 in interest. A 3% origination fee adds $3,000 upfront, which pushes the real annual cost of the money to roughly 11.3%.

Business loan payment

$
%
years
%

Monthly payment

$2,125

Total interest
$27,482
Origination fee
$3,000
Total cost of borrowing
$30,482
Effective APR including the fee
11.32%

The rate you really pay on the money you receive after the fee.

How this calculator works

Business loans are usually quoted as an interest rate plus fees. The fee is taken upfront, so you receive less money than you repay on, which makes the true cost higher than the headline rate. This calculator shows the payment, the interest, the fee and a quick estimate of the effective annual rate.

SBA 7(a) loans, bank term loans and equipment loans are mostly amortising: fixed monthly payments over the term. Merchant cash advances and some online lenders quote a 'factor rate' instead; convert those to an APR before comparing, because they are often far more expensive than they look.

Lenders will look at your time in business, annual revenue, credit score and debt service coverage ratio, which is your annual operating income divided by your annual loan payments. Most want it above 1.25.

The formula

Payment
amount × r ÷ (1 − (1 + r)^−n), with r = rate ÷ 12, n = months
Total interest
payment × months − amount
Effective APR
the rate at which the same payments repay only the cash you receive (amount − fee)

Worked example

Borrowing $100,000 at 10% for 5 years gives a payment of about $2,125 and total interest of about $27,480. With a 3% fee ($3,000) the total cost of borrowing is about $30,480 and because you only receive $97,000, the effective rate is about 11.3%.

Tips

  1. 01Compare loans by total cost, not by monthly payment or by factor rate.
  2. 02Check for prepayment penalties if you might repay early from a big contract.
  3. 03Make sure the monthly payment fits comfortably inside a slow month's cash flow.

Frequently asked questions

What is a good interest rate for a business loan?

It varies with the market and your profile. Bank and SBA loans are usually the cheapest; online and short-term lenders cost more.

How do lenders decide how much I can borrow?

Mainly on revenue, profits, time in business, credit and the debt service coverage ratio. Collateral and a personal guarantee are often required.

What is a factor rate?

A multiplier, such as 1.3, applied to the amount borrowed to get the total repayment. A 1.3 factor over six months is an APR far above 30%.