Business Loan Calculator

Monthly payment formula

The standard loan amortization formula is M = P × r × (1 + r)^n / ((1 + r)^n − 1), where P is principal, r is the monthly interest rate (APR / 12), and n is the total number of months. The calculator runs this formula and builds the full amortization schedule showing how much of each payment goes to interest versus principal.

Early in the loan, most of your payment is interest. As the balance shrinks, more of each payment is principal. The chart above visualizes this shift clearly — it's why paying extra principal early in a loan saves so much more interest than extra payments at the end. An extra $100/month in year one on a 7-year loan saves 3–5× more interest than the same $100 applied in year six.

Typical business loan rates in 2026

• SBA 7(a) loans: 10.5–13% APR (prime + 2.75–4.75%), up to 25 years for real estate, 10 years for equipment and working capital. Best rates for most qualified borrowers.
• Traditional bank term loans: 7–12% APR for established businesses with strong credit. Requires 2+ years of tax returns and a real banking relationship.
• Online lenders (Kabbage, OnDeck, BlueVine, Funding Circle): 12–45% APR, faster approval, shorter terms (6–36 months). Price reflects speed.
• Equipment financing: 8–20% APR, secured by the equipment itself. Equipment serves as collateral so requirements are looser.
• Business lines of credit: 10–22% APR, revolving, pay interest only on drawn balance. Best for working capital needs, not capex.
• Merchant cash advances: effectively 40–100%+ APR — avoid unless there's no alternative. Often triggers predatory repayment terms that tank cash flow.

Lower rates require established revenue history (2+ years), strong personal credit (700+), and usually a personal guarantee. New businesses typically start at the high end of these ranges, which is why timing a loan to coincide with 2 years of clean financials saves significant money over the loan's life.

What the term length does to total cost

Longer terms lower the monthly payment but raise total interest paid. A $100,000 loan at 8% for 3 years has a $3,134 monthly payment and $12,810 total interest. The same loan stretched to 7 years has a $1,559 monthly payment but $30,958 total interest — nearly 2.5× the interest cost. Right term depends on cash flow: pick the shortest term your monthly cash flow can support without strangling the business.

Quick test: can you comfortably cover 1.5× the monthly payment out of current operating income? If yes, go shorter. If no, go longer and build toward refinancing in 24 months once revenue is more predictable.

Should you take out a business loan?

Use our DSCR calculator and cash flow projector before committing. A business loan only makes sense if the assets or growth funded by the loan produce a higher ROI than the loan's cost. Buying a $50,000 machine at 10% interest that generates $20,000 additional annual profit is a great deal — ~40% ROI net of interest. Borrowing to cover ongoing operating losses is almost always a mistake; you are buying time, not building value. Losses funded by debt become bigger losses once the debt service starts.

The personal guarantee trap

Nearly every small business loan requires a personal guarantee. That means if the business fails, the lender can come after your personal assets — house, brokerage accounts, bank accounts. An LLC protects you from customer lawsuits, not from the guarantor agreement you signed. Before taking on more than you can personally absorb, make sure the loan is really necessary and the business plan supports repayment in a realistic (not best-case) scenario.

Practical test: if the business fails six months after this loan funds, will the personal guarantee bankrupt you? If yes, the loan is too big. Either scale it down, wait, or restructure as equipment-only financing where the equipment alone is collateral.

Prepayment and refinancing

Most SBA and bank loans allow prepayment without penalty after the first year. Online lenders and merchant cash advances often have origination or prepayment fees that can eat any savings. Before refinancing or paying off early, check the fine print. Running the numbers through this calculator with different interest rates and terms is the fastest way to see whether refinancing makes sense on net.

General refi rule: 2-point rate drop + 2+ years remaining term = probably worth it. Under either threshold, the savings rarely cover the transaction cost and underwriting time.

Interest-only and balloon loans

Commercial real estate loans sometimes offer interest-only payments for the first year or two, then amortize. Balloon loans require a large lump-sum payment at the end of the term. Both lower monthly cash needs upfront but shift risk to the future. Only use these with a specific plan for the balloon payment (refinance, sale, major revenue event). "We'll figure it out when we get there" is how commercial real estate borrowers end up forced-selling at the worst time in the cycle.

How to actually qualify

1. Personal credit: aim for 680+ for most banks, 650+ for online lenders. Pull your report 90 days before applying and dispute any errors.
2. Time in business: 2+ years strongly preferred; 6+ months is minimum for online options. Under 2 years, expect to pay 3–5 points more.
3. Revenue: most banks want $150K+ annual revenue. Online lenders start at $50K. SBA Express is $100K minimum.
4. Documentation: 2 years of tax returns (personal + business), 12 months of bank statements, P&L, balance sheet, and often a business plan.
5. DSCR: banks want EBITDA to cover 1.25–1.5× debt service. Run the DSCR calculator before applying — a DSCR under 1.20 almost always means decline.
6. Collateral: for loans over $25K, some form of collateral (equipment, receivables, real estate) shortens decision time and improves rate.

Alternative financing to consider first

Loans are not always the right answer. For short-term working-capital needs, a business line of credit gives you flexibility without paying interest on money you don't use. For equipment, leasing often beats buying in cash flow terms and preserves depreciation deductions. For growth capital, SBA loans are almost always cheaper than online options if you can wait for approval. For very new businesses, a microloan through a nonprofit CDFI (community development financial institution) can be faster and friendlier than a bank — $10K–$50K at below-market rates.

After you take the loan

Set up automatic payments from your business checking so you never miss a payment — one missed payment drops personal credit 40–60 points and can trigger default clauses. Track the loan in your accounting software as a liability and book interest expense monthly. Update your cash flow projection to reflect the new debt service; many businesses see their runway shrink after a loan because the monthly payment eats cash faster than the new capital extends runway. Plan for the payment before you sign.