Business Loan Calculator

Enter the amount, rate and term from a lender's quote and choose how the loan is repaid: regular payments, interest only with the principal due at the end, or a single payment at maturity. Add the fees the lender charges to see the real APR, the rate that reflects both interest and fees. With the defaults, a $10,000 five-year loan at 10% has a payment of $212.47 a month, but $1,250 in fees lifts its real cost to an APR of about 15.9%.

SBA Loans

The U.S. Small Business Administration does not usually lend money directly. Instead it guarantees part of loans made by approved banks, credit unions and other lenders, which reduces the lender's risk and lets small businesses borrow on better terms than they otherwise could. SBA-backed loans typically offer lower down payments, longer repayment terms and capped interest rates.

In return, the application is more demanding than for many private loans. Expect to show that the business operates for profit in the United States, meets the SBA size standards for its industry, has sought other financing and can repay from cash flow. Lenders commonly ask for:

• A business plan and description of how the funds will be used.
• Personal and business credit histories.
• Personal and business federal tax returns, usually for the last three years.
• Current financial statements: profit and loss, balance sheet and cash-flow projections.
• Business licenses, registrations, articles of incorporation and leases.
• Résumés showing the owners' management experience.
• Details of collateral available and a personal guarantee from owners of 20% or more.
• Information on existing business debts.

SBA Loan Types

The SBA runs several programs aimed at different needs:

7(a) loan. The flagship program and the most flexible, with loans of up to $5 million for working capital, equipment, real estate, refinancing debt or buying a business. The SBA guarantees up to 85% of loans of $150,000 or less and 75% of larger ones. Terms run up to 10 years for equipment and working capital and up to 25 years for real estate, and interest rates are capped at a spread over the prime rate.

Microloan. Small loans of up to $50,000, made through nonprofit community intermediaries rather than banks. They suit startups and very small businesses buying inventory, supplies or equipment, and intermediaries often provide training and technical help alongside the money. Terms are short and the average loan is around $13,000.

Real estate and equipment loan (CDC/504). Long-term, fixed-rate financing for major fixed assets such as buildings, land and heavy machinery. A typical project is split three ways: a bank lends about 50%, a Certified Development Company backed by the SBA lends up to 40%, and the borrower puts in at least 10%. It cannot be used for working capital or inventory.

Disaster loan. Low-interest loans for businesses, nonprofits, homeowners and renters in declared disaster areas, made directly by the SBA. They cover physical damage to property and economic injury, meaning working capital needed because the disaster disrupted the business.

Other Loan Types

Conventional loans. Term loans and lines of credit from banks and credit unions without a government guarantee. They can close faster than SBA loans and with less paperwork, but usually require strong credit, two or more years in business, solid revenue and often collateral. Online lenders offer quicker approvals at higher rates, and alternatives such as equipment financing, invoice factoring and merchant cash advances fill other gaps, the last often at very high effective rates.

Personal loans. New businesses without a track record sometimes rely on the owner's personal loan or credit card. Approval depends on personal credit and income, and you are personally liable for the debt, so a business failure can hit your personal finances directly.

Interest-only loans. Some loans require only interest payments for an initial period or the whole term, with the principal due in a lump sum at the end. They keep early payments low, which can help a growing business, but require a plan to repay or refinance the balloon payment. Choose Interest only under Pay back to see this structure.

Business Loan Fees

Business loans often carry more fees than consumer loans, and they can change the cost of a loan dramatically. Because the interest rate excludes them, always compare the APR or total cost of offers. Lenders may charge:

• Origination fee: a percentage of the loan, commonly 1% to 6%, often deducted from the proceeds.
• Documentation or underwriting fee: a flat amount for preparing and processing the loan.
• SBA guarantee fee: on 7(a) and 504 loans, a percentage of the guaranteed portion that lenders typically pass on to the borrower.
• Packaging or broker fees: when a third party helps prepare the application.
• Prepayment penalty: a charge for paying off early, common on longer-term loans.
• Late payment and returned-payment fees.
• Annual or maintenance fees on lines of credit.

PMT = P × r ÷ [1 − (1 + r)⁻ⁿ] APR: solve P − Fees = PMT × [1 − (1 + i)⁻ⁿ] ÷ i, then APR = i × m

P

loan amount

r

interest rate per payment period

n

number of payments

i

periodic rate that equates the payments with the cash received

m

payments per year

The bottom line: a low headline rate can hide an expensive loan. Fees matter most on small and short loans, because they are spread over fewer dollars and fewer years. In the default example, a 5% origination fee and a $750 documentation fee add $1,250 to the $2,748.23 of interest, so the loan costs $3,998.23 in total and its APR is nearly six percentage points above the stated rate. Ask every lender for a written breakdown of all fees and compare offers using the APR shown here.

Frequently asked questions

Sources

• U.S. Small Business Administration – Loans
• SBA – 7(a) loans
• SBA – 504 loans