Business Loan Calculator

Understand your business loan results

Nine figures appear above and they are not synonyms. Confusing them is the commonest way a business misjudges what it has agreed to.

STATED INTEREST RATE (note rate) is the annual percentage in the agreement — a label, not a rate anything is charged at. PERIODIC RATE is what interest is actually charged at, once per payment period: the stated rate divided by the payments a year where the compounding basis matches the cadence, reconciled through the effective annual rate where it does not. That bites — payments every two weeks are 26 a year, but 26 is not a compounding basis, so a biweekly facility is not priced at the stated rate divided by 26.

CASH RECEIVED (cash proceeds) is the money that reaches the account on closing day — the tile above uses the shorter label. FINANCED BALANCE is what interest is charged on. CONTRACTUAL PRINCIPAL is what the note says you borrowed. On a plain loan all three are one number; the moment a fee appears they separate, and which one moves depends on how the fee is paid. Cash received is BELOW contractual principal whenever a fee is deducted at closing, because you are then charged interest on money that never arrived.

PERIODIC PAYMENT is one instalment. ANNUAL DEBT SERVICE is the scheduled principal and interest falling due over twelve months — read off the schedule itself, not the payment multiplied by the frequency, which overstates a declining-payment note. It is the figure coverage is measured against, and the one a lender asks for. MATURITY is when the facility ends; BALANCE DUE AT MATURITY (the balloon) is whatever the instalments have not retired by then, reported separately because the instalments never pay it.

TOTAL INTEREST is the interest column summed. FEES is what the lender charges besides interest. TOTAL BORROWING COST is the two added — what the money costs, excluding principal, because repaying what you borrowed is not a cost. TOTAL PAID includes principal: the largest figure on the page and the least useful for comparison, since a bigger loan on identical terms has a bigger total paid at exactly the same cost per dollar.

EFFECTIVE APR folds all of it together: the internal rate of return of your own cash flows — what arrived against what goes out, on the dates it moves. That is why a fee raises the APR while leaving the stated rate untouched, and why two offers at the same stated rate can price very differently. The page reports the nominal estimate (the convention lenders quote) and the effective figure; compare on the effective one when payment frequencies differ, because nominal rates quoted at different cadences are not comparable.

How the amortization schedule works

The schedule is the loan; every summary figure is a fold of it. Each row charges interest on the opening balance, applies the instalment and carries the remainder forward. Early rows are mostly interest because the balance is large — arithmetic, not lender policy, and the reason extra paid early removes far more future interest than the same money paid late.

The Fees column is not cosmetic. A fee paid at closing appears as a period-0 row, because that is when the cash moves. A financed fee shows on the first payment row and is already inside the opening balance, which is why the instalment is larger. A deducted fee also appears at period 0, but the balance beside it is unchanged — you are paying interest on money you never received.

The annual summary is a fold of the same rows, and its first line is the figure a lender measures cash flow against. On an equal-principal note the yearly totals fall, so the first year is the peak and the year coverage is tested in. Export as CSV to reconcile against a lender's table: a cent or two a row is rounding; a gap that grows is a different day-count or compounding assumption.

One structure has no schedule in this sense. A single payment at maturity pays nothing during the term: interest is added to the balance each period and the whole amount falls due at once at the end. The table reflects that rather than dressing it up — the payment column reads “none” until the final row, the interest column is labelled as accrued rather than paid, and the balance grows instead of falling. There is no periodic payment-equals-principal-plus-interest split to show before maturity, because no payment is made.

Can your business afford the loan?

Affordability for a business is a coverage ratio, not a share of income, and it is computed from the cash flow you enter rather than a rule of thumb.

Debt service coverage is cash available for debt service divided by annual debt service. The numerator starts at net operating income, adds back non-cash charges — depreciation and amortization reduce reported profit without moving cash — and subtracts what genuinely leaves: owner distributions and any capital-expenditure reserve. The denominator is the principal and interest scheduled for the next twelve months, taken from the schedule itself, plus what existing facilities already cost.

Two mechanics repay attention. Debt service on a facility this loan repays must be marked as eliminated or the ratio double-counts a payment that will stop — the commonest way a debt consolidation is made to look worse than it is. And add-backs move capacity a long way: worked example 4 shows $45,000 of depreciation added back raising the supportable loan by roughly 60% at the same coverage ratio, because the add-back lands on the headroom that is left after existing debt service, not on the gross total.

The panel also runs backwards: from cash flow and a target ratio to the maximum annual debt service, the maximum payment, and the largest loan that payment supports. That last figure comes from the engine solving for principal, then being run forwards again to confirm the payment returns where it started.

The target ratio is yours. This page prints no threshold and applies none — lenders commonly work above 1.0 for margin, and where a specific number applies it is in the term sheet, not in a calculator. The readout says only whether your coverage is below, at, or above the target you chose.

How to compare business loan offers

Offers arrive in incompatible shapes — a rate, a factor, a monthly payment — with fees described differently in each. The comparison prices all of them through one engine on one set of conventions, so the differences are between the offers rather than between two ways of calculating.

Three leaders are reported and deliberately not combined: lowest payment protects cash flow now, lowest total borrowing cost is the cheapest money over the term, lowest APR is the best price per dollar actually received. On real offers these are usually three different lenders. No overall winner is named, because ranking needs an exchange rate between cash now and cash later that only the borrower knows, and would ignore the terms that are not numbers — guarantee, collateral, covenants, prepayment clause, funding time. Those travel with each offer and are never scored.

Where the purpose is buying a company rather than an asset, a business acquisition loan is underwritten on the target's cash flow as well as yours. Watch the cash-received row throughout: two offers with the same headline amount can put materially different sums in the account, and the one that hands over less is charging interest on the difference.

Business loan formula

For a standard amortizing loan the instalment is the annuity identity: M = P × r ÷ [1 − (1 + r)^−n]. M is the level payment for one period; P is the financed balance the payment is sized on; r is the PERIODIC interest rate — for one payment period, not the annual rate; n is the total number of payments. Where the rate is zero the identity is undefined and the payment is simply M = P ÷ n, which the engine handles as an exact branch rather than as a limit.

The periodic rate r comes from the nominal annual rate j, the compounding basis m and the payment frequency p as r = (1 + j/m)^(m/p) − 1. Only when m and p are equal does this reduce to r = j/p.

THAT FORMULA DESCRIBES ONE STRUCTURE. It does not describe equal-principal, interest-only, balloon or single-payment notes, and applying it to them gives the wrong answer. Each needs its own cash-flow logic. A structure leaving a balance B outstanding at maturity is sized on M = (P − B·(1 + r)^−n) × r ÷ [1 − (1 + r)^−n], which collapses to M = P · r exactly when B is the whole balance — the interest-only payment. Equal-principal is not an annuity at all: each period repays P ÷ n of principal plus interest on whatever is still outstanding, so the payment declines and total interest is r · P · (n + 1) ÷ 2. A single payment at maturity has no periodic instalment to solve for at all; interest capitalises and the maturity amount is the balance plus everything accrued.

Effective APR is not a formula but a search. The engine builds the borrower’s actual cash-flow sequence — what reached the account net of anything paid at closing, then every scheduled payment and any balloon on the dates they fall — and finds the periodic rate at which their net present value is zero. That is why a fee raises the APR while leaving the stated rate untouched.

Worked examples

Every figure in these examples is produced by the calculator above at build time, from the inputs stated. Enter the same inputs and you will get the same numbers.

1. A standard equipment loan

A company borrows $150,000 over ten years at 8.5%, monthly payments, fully amortizing, no fees. The rate is a round illustrative figure chosen to sit inside the range small-business borrowers were quoted in 2026 — it is not a quote, an average or a forecast. This is the base case every other example is measured against.

With no fees the estimated APR equals the note rate exactly. That is the test of an APR: when there is nothing to disclose beyond the rate, it discloses the rate. Annual debt service is the figure a lender measures cash flow against — not the monthly payment.

2. What fees do to the price of the money

The same facility at $500,000 and 11% over ten years, with a 3% guaranty fee and a $2,500 packaging fee. First deducted from the proceeds, then financed into the balance — identical fees, different cash flows.

Read the two columns against each other. Financing the fee costs MORE in total interest — you pay interest on the fee for ten years — yet its APR is LOWER, because the money leaves later and later money is worth less. Deducting the fee takes the whole cost at closing, which is why it prices higher. Neither is a trick; they are genuinely different cash flows, and the note rate of 11% describes neither.

3. A balloon on a commercial property

$1,200,000 at 7.5% with a ten-year maturity and a $720,000 balloon — a twenty-five-year amortization quoted on a ten-year term, which is how commercial mortgages usually arrive. Compared against the same loan fully amortizing over the same ten years.

The instalment saving is large and so is what it buys: a seven-figure balance due on a single day. Note that the balloon structure also shows the LOWER annual debt service, so it would post the better coverage ratio of the two — arithmetically correct, and exactly why coverage of the instalments is not coverage of the loan.

4. How much can this cash flow actually carry?

A business with $1,400,000 of revenue and $1,287,500 of operating expenses, so $112,500 of operating income, sizing a ten-year facility at 9% against a 1.25x target. It already services $30,000 a year on an existing note. The second column adds back $45,000 of depreciation — a non-cash charge — and changes nothing else.

Read the rows in order and the arithmetic of capacity is visible end to end. Cash available divided by the 1.25x target gives the MAXIMUM ANNUAL DEBT SERVICE the business can cover in total; the $30,000 already committed to the existing note comes off that total, and only the remainder is AVAILABLE FOR A NEW FACILITY. That remainder — not the total — is what sizes the loan. Depreciation is a non-cash charge, so adding it back is not accounting optimism; it is cash the business actually has, and the second column shows how much more borrowing that same business supports once it is counted. Both columns land on the target ratio by construction: what changes is the size of loan that ratio permits.

Business loan rates, terms and structures

Three different kinds of number get called “the rate”, and confusing them is how a quote gets misread. An OFFICIAL OR REFERENCE BENCHMARK is published by a named authority for a stated period — the bank prime rate, a Treasury yield, a survey average. A PROGRAMME CEILING is a rule: the most a lender is permitted to charge under a given programme, which is not what anyone actually pays. A LENDER-SPECIFIC OFFER is the only rate that applies to you, and it comes from a term sheet, not from a calculator.

This page publishes benchmarks with their publisher and period, and derives the SBA ceiling in the table below from the cited prime rate rather than stating a range. It publishes no “typical market rate”, because a single number across the whole of business lending would be illustrative at best and misleading at worst: pricing turns on revenue, time in business, collateral, industry, credit profile and the lender’s own appetite.

TERM is set by what the money buys, and the useful-life principle runs through the whole market, not just guaranteed lending: working capital is financed short, equipment over its service life, real estate longest. Borrowing over longer than the asset lasts means still paying for something that has stopped earning.

STRUCTURE is the third variable and the one most often left unexamined. Fully amortizing clears the debt by maturity. Equal-principal front-loads the cash-flow burden and costs less in total. Interest-only and balloon lower the instalment by leaving principal outstanding. A single payment at maturity defers everything. The calculator prices all five, and the right one depends on when the financed asset actually produces cash.

SBA 7(a) maximum variable rate by loan size, at the cited prime rate

SBA does not set 7(a) rates; it caps them. A lender may charge no more than a permitted base rate plus a spread that narrows as the loan grows. Applying those caps to the prime rate cited below gives the ceiling for each size band — a lender may quote less, and an established borrower often will. These are maximums, not market rates, and the section that follows explains where the programme fits.

Spread caps: U.S. Small Business Administration, 7(a) terms, conditions and eligibility. Prime is one of several base rates a lender may use, so a loan priced off a different permitted base will differ. Fixed-rate maximums are published separately by SBA and are not shown here.

Spread caps from SBA 7(a) terms, conditions and eligibility (sba.gov), consulted 2026-08-22. Prime rate from the dataset cited below. Prime rate 6.75%, Board of Governors of the Federal Reserve System (H.15), hosted on FRED, as of May 15, 2026.

SBA vs conventional vs alternative business loans

The trade across the three tiers is consistent: the cheaper the money, the longer it takes and the more documentation it costs to get.

SBA lending is a government guaranty on a loan a bank still makes and still underwrites. Under 7(a) the maximum loan amount is $5 million, and SBA guarantees 85% of loans up to $150,000 and 75% above that. Maximum maturity is set by what the money buys: 10 years or less for working capital and general purposes, up to 25 years for real estate or for equipment with a remaining useful life over ten years — the distinction that separates a general working-capital facility from an equipment loan. Rates are capped rather than set: on variable-rate 7(a) loans the lender may charge no more than a permitted base rate plus a spread narrowing from 6.5 points on loans of $50,000 or less to 3.0 points above $350,000. The table above applies those caps to the current prime rate.

The 504 programme is a different instrument: fixed-asset finance up to $5.5 million, with 10-, 20- and 25-year maturities, priced off an increment over 10-year Treasury issues. It cannot fund working capital, inventory or rental-property investment — if what you need is cash to run on, 504 is not the programme whatever the rate looks like.

SBA guaranty fees are not a fixed number and none is quoted here: SBA publishes the upfront guaranty fee and the lender's annual service fee for each fiscal year in an Information Notice, and they have been set to zero for some loan sizes in some years. Ask the lender for the fee applying to your loan in the current fiscal year, enter it in the Fees panel, and read the APR.

Conventional bank lending carries no guaranty and therefore no programme caps: pricing, term and covenants are the bank's own, and an established borrower with clean financials can beat SBA pricing outright. Alternative and marketplace lenders sell speed, usually quoting a factor, a fixed fee or a daily debit rather than a rate. Convert it — enter the amount that reaches the account, the actual repayment and the actual term, then read the estimated APR, which for short fee-heavy facilities is routinely a large multiple of what the quoted cost suggests.

Business loan vs line of credit

A term loan draws once, amortizes on a schedule and ends. A line of credit has a limit rather than a balance: you draw, repay and draw again, interest runs only on what is outstanding, and you pay for the facility whether or not you use it. The panel models that directly — an average outstanding balance from your expected utilization, interest at the periodic rate on it, an annual fee charged per anniversary rather than pro-rated, and draw fees on the volume drawn.

The revolver reports no APR, deliberately: an APR is the internal rate of return of a contractual cash-flow sequence, and a revolver has none until it has been drawn and repaid — the utilization is your forecast. It reports a cost-of-carry rate instead, which moves with that forecast.

The comparison runs over one horizon and discloses the balance the term loan still owes at the end of it, because a five-year loan measured against an eighteen-month revolver has not finished costing money at month eighteen. Where the need is a single known purchase the term loan is generally cheaper; where it is a working-capital cycle that fills and empties, paying for flexibility can be rational even at a higher carry.

Fees that change the true cost of borrowing

Fees do not change the stated rate. They change the price of the money, and by how much depends on how the fee is paid — a distinction most quotes bury.

DEDUCTED from proceeds: netted out at closing, balance and instalment unchanged, less cash arrives. The most expensive treatment in APR terms, because the whole cost lands at time zero. FINANCED into the balance: full proceeds arrive, the instalment rises, and you pay interest on the fee for the life of the loan — it costs MORE in total interest yet prices at a LOWER APR, because the money leaves later and later money is worth less. Both are true at once, and worked example 2 shows them side by side. PAID UPFRONT in cash: balance, instalment and proceeds unaffected; in cash-flow terms identical to the deducted treatment, and the engine returns exactly the same APR for both to the last decimal.

Enter every fee you have been told about — one you have not been told about cannot appear in the APR, which is reason enough to ask for the full schedule of charges in writing before comparing anything.

Balloon and interest-only business loans

Both lower the instalment by not repaying principal, and both create an obligation the schedule never discharges. An interest-only note pays exactly the interest, so the whole principal falls due at maturity. A balloon note amortizes partially — commonly on a schedule longer than the loan runs, which is how commercial mortgages arrive: a twenty-five-year amortization on a ten-year maturity. Worked example 3 shows a property facility where that cuts the instalment by around 28% against full amortization over the same maturity, at the cost of a seven-figure balance due on one day.

Three structures are often lumped together and they are not the same thing. INTEREST-ONLY pays exactly the interest each period and nothing else, so the principal is untouched and the whole of it falls due at maturity. BALLOON pays a real instalment that retires some principal, and the unamortized remainder falls due at maturity. SINGLE PAYMENT pays nothing at all during the term: interest capitalises into the balance and one payment settles everything at the end. The first two have instalments you can budget for; the third does not, and the calculator presents it as an accrual rather than inventing payments that never happen.

Two consequences follow and the page enforces both. The balance due at maturity is reported as its own figure, never folded into the instalment or the total. And coverage is computed on the instalments only, so a balloon note shows BETTER coverage than a fully amortizing one of the same size — arithmetically correct and, alone, misleading: covering the payments says nothing about covering the balloon. Plan the exit before signing, and note that the usual plan, a refinance, depends on the asset's value, the business's financials and the rate environment years away.

Early repayment

Paying ahead removes future interest, and the panel quantifies exactly how much against a baseline of the same loan without extras — original interest, new interest, interest saved, payments made, and how much sooner the balance clears.

Three shapes are supported and they behave differently. A RECURRING EXTRA adds the same amount to every instalment; because it starts working immediately and compounds its own effect, it is usually worth more than the same money paid later. An ANNUAL EXTRA lands once a year — a seasonal surplus, a tax refund, a bonus quarter. A ONE-TIME EXTRA is a single lump sum, and where you place it matters: the earlier it lands, the more future interest it removes, because it is removed from a larger balance for longer. There is also a payoff goal, which runs the calculation backwards and solves for the recurring extra that clears the loan a chosen number of months sooner.

Every extra dollar goes to principal, so the balance drops, the interest charged next period drops with it, and the loan ends earlier at the same instalment. That is the whole mechanism; there is nothing clever in it, which is why the saving is reliable when the contract permits it.

AND THAT IS THE CONDITION. Real business loan agreements frequently restrict prepayment. Some charge a prepayment penalty — a fixed sum, a percentage of the amount prepaid, or a percentage of the balance. Some apply a declining schedule over the first years. Some direct extra payments to future instalments rather than to principal, which changes nothing about what you owe. Enter any penalty you are subject to and the panel reports the saving NET of it, which can be negative. Do not assume a loan can be repaid early for free: check the prepayment clause before you plan around it, and confirm with the lender that extras are applied to principal.

Personal guarantees and collateral

These are two different things, frequently discussed as one. Both are common in small-business lending; neither is universal, and what either does depends on the document you sign and where you sign it.

COLLATERAL is a security interest in specific property — equipment, receivables, inventory, real estate — granted by whoever owns it, giving the lender a defined claim on defined assets. A GUARANTEE is a personal promise by an individual to pay if the borrower does not, tied to no particular asset. A loan can be secured with no guarantee, guaranteed with no security, both, or neither.

A guarantee's scope is written, not assumed. An unlimited guarantee covers the whole obligation. A LIMITED guarantee is capped by amount, percentage or named assets. A joint and several guarantee lets the lender pursue any one guarantor for the whole sum rather than each for a share. A springing guarantee activates only on defined triggers. These are negotiable, and which you are being offered is worth asking before the documents are drawn.

What a lender may do after default is a matter of the agreement and of law: typically demand payment, enforce against collateral, and pursue a guarantor. What follows — which assets can be reached, in what order, and what is protected — varies by jurisdiction, entity type, asset and how it is held. Exemptions for a primary residence, and the protection attaching to retirement accounts, differ substantially between states and between account types; general statements about them are unreliable and this page will not make one.

What is safe to say is procedural: limited liability protects owners from the operating liabilities of the business, not from a debt they have personally guaranteed, because that is their own promise rather than the company's. Read the guarantee clause as carefully as the rate, ask whether a cap or a sunset is available and whether it releases on refinance or sale, and take advice in your jurisdiction before signing.

Principal, interest and business accounting

The instalment is one payment and two different things, and treating it as a single expense is a recurring bookkeeping error with real consequences for reported profit.

PRINCIPAL repayment is not an expense: it reduces a liability, so cash falls, the loan balance falls and the income statement is untouched. Booking the whole instalment as an expense overstates costs, understates profit and leaves a loan balance that never comes down. INTEREST is a financing expense of the period in which it accrues, sitting below operating profit — which is why coverage is measured against operating income before interest; putting interest inside operating costs makes the ratio circular. FEES do not automatically follow interest: depending on their nature and your reporting framework a loan fee may be expensed immediately, capitalised across the life of the loan, or treated as a cost of acquiring an asset — three different profit profiles from identical cash.

On tax: interest on borrowing used for business purposes is generally deductible, but neither automatically nor without limit. In the United States, section 163(j) caps deductible business interest expense at business interest income plus 30% of adjusted taxable income plus floor-plan financing interest, with a small-business exemption below an inflation-adjusted average gross receipts threshold — $32 million for 2026 — and exceptions for certain electing real property, farming and regulated utility businesses. Whether any of it applies depends on your entity, receipts, jurisdiction and use of funds.

None of this is computed here and none of it is advice. The calculator returns interest and fees as separate figures precisely so your accountant can apply the treatment your circumstances call for.

When financing economics break even

A business loan is worth its cost when the thing it buys earns more than the borrowing does. That is an arithmetic question and the panel answers it, without answering the question of whether to borrow.

It starts from FINANCING TOTAL COST — interest plus fees over the whole facility, taken from the loan already computed above. Not the amount borrowed: repaying principal is not a cost, it is returning what you were lent. Against that it sets your EXPECTED INCREMENTAL ANNUAL OPERATING PROFIT — the profit that exists only because of the financed asset, after the cost of running it and before the loan payments. Multiplied by the useful life, that is the CUMULATIVE OPERATING PROFIT, with any residual value added.

Three figures come out. FINANCING COST AS A SHARE OF EXPECTED PROFIT says how much of the return the borrowing consumes. BREAK-EVEN ANNUAL INCREMENTAL PROFIT is what the asset has to earn each year for the two to meet — below it the financing costs more than the asset returns, above it the asset covers its own borrowing. BREAK-EVEN MONTHLY INCREMENTAL PROFIT is the same figure at the cadence most operators actually plan on.

Two things it deliberately is not. It is not discounted: a dollar of profit in year five counts alongside a dollar in year one, because the input is a forecast and discounting a forecast to eight decimal places does not make it more true. And it produces no verdict — no score, no rating, no proceed-or-not. The gap between your forecast and the break-even point is the number worth arguing about, and that argument belongs to people who know the business.

Frequently Asked Questions

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