Small Business Loan Calculator

Loan Amount

Annual Interest Rate

Loan Term

yrs

Loan Type

Origination Fee

Principal vs interest, year by year

Y7 · Principal 44.20KInterest 1.82K

Enter your loan details to see the payment breakdown.

Monthly Payment

$0/mo

Effective APR

0.00%

Stated Rate

7.50%

Total Interest Paid$0

Total Loan Cost$0

What is a Business Loan?

A Small Business Loan Calculator computes the full cost of a business financing arrangement: monthly payment, total interest paid, total loan cost (including origination fees), and the effective Annual Percentage Rate (APR) that reflects the true cost of borrowing after fees. It models five common business loan types, conventional bank loans, SBA 7(a), SBA 504, equipment loans, and lines of credit, with context on each program's typical use case and structure.

The critical insight this calculator surfaces is the gap between your stated interest rate and your effective APR. Origination fees, which most business loans carry, reduce the actual disbursement you receive while leaving the payment schedule unchanged. This increases the true cost above the stated rate. A lender quoting 7.5% with a 2% origination fee on a 5-year $100,000 loan is actually delivering an effective APR of about 8.4%. That gap compounds when fees are higher or terms are shorter.

Business financing is categorically different from personal lending. The stakes are higher, the loan sizes are larger, and the interplay between loan type, term, and purpose is more complex. SBA 7(a) loans provide government-backed access to capital for working capital or acquisitions; SBA 504 is structured for major fixed assets like commercial real estate or equipment over $1 million; equipment loans are asset-backed with the financed equipment as collateral; conventional bank loans offer the most flexibility but the strictest qualification standards.

Before applying for any business loan, understanding the true APR, not the headline rate, is essential for comparing offers. A lender offering 7% with a 3% origination fee may be more expensive than one offering 8% with no fee, depending on the term. This calculator does the math precisely so you can compare accurately.

Why Use a Small Business Loan Calculator?

Surface the APR gap from origination fees. The most important function of this calculator is computing the difference between your stated rate and effective APR. Lenders are required to disclose APR on personal loans, but business loan disclosures are less standardized. Many small business owners focus on the interest rate and monthly payment without accounting for origination fees that front-load cost into the transaction. A 2% origination fee on a 3-year $500,000 loan raises the effective APR by approximately 1.5–2.0 percentage points over the stated rate.

Compare loan types before approaching lenders. The five loan type cards provide a quick-reference guide to which program fits which need. SBA 7(a) for general business purposes; SBA 504 for real estate and heavy equipment; equipment lending for asset-backed machinery; conventional for established businesses with strong balance sheets; lines of credit for revolving working capital needs.

Model the monthly payment impact on business cash flow. A $300,000 loan at 9% over 7 years costs $4,900/month, a real constraint on operating cash flow. Running different term lengths shows the trade-off: a 10-year term reduces the payment to $3,800/month but adds $28,000 in total interest.

Pre-qualify the total loan cost. Total Loan Cost (including origination fee) gives you the full amount you will return to the lender, the true cost of the financing, not just the interest.

Who Should Use This Calculator?

Business owners planning an expansion purchase. Whether buying equipment, real estate, or funding an acquisition, modeling the loan payment and true APR before negotiating with lenders gives you a negotiating anchor and a clear budget constraint for what terms you need.

Startups evaluating their financing options. While the full range of SBA programs requires established business history, knowing the rate and payment benchmarks for each loan type helps founders evaluate early-stage options (microloans, equipment financing, personal guarantee loans) against each other.

Small business owners comparing multiple loan offers. If you've received quotes from a bank at 7.5% + 1% fee and an online lender at 9.5% + 0% fee for the same loan size and term, the APR comparison quickly shows which is cheaper. Banks quote interest rates; online lenders quote factor rates (multiply by the principal to get total repayment cost), use this calculator to translate both into comparable APRs.

Borrowers evaluating the business loan impact on personal credit. If you're a sole proprietor personally guaranteeing a business loan, the monthly payment may count against your personal debt-to-income ratio for mortgage qualification. Running the Debt-to-Income Ratio Calculator after modeling the business loan payment shows whether the business debt would affect your home buying capacity.

CFOs and financial controllers modeling debt service capacity. The Debt Service Coverage Ratio (DSCR), annual net operating income divided by annual debt service, is the primary metric lenders use to assess repayment capacity. Most SBA lenders require a DSCR of 1.25× or higher. Knowing the annual debt service from this calculator lets you back-calculate what NOI you need to qualify.

What Insights Does the Small Business Loan Calculator Give You?

Monthly Payment is the fixed monthly obligation under a standard amortizing structure. This is what comes out of your business account every month, the foundational constraint for cash flow planning. For SBA 7(a) loans and equipment loans, the payment is typically level (same amount every month) on a fully amortizing schedule.

Total Interest Paid is the cumulative interest cost over the full loan term, the interest component of all 60, 120, or 300 payments. This is distinct from the origination fee and shows the ongoing cost of borrowing versus the upfront fee. Comparing total interest across different term lengths shows the trade-off between lower monthly payments (longer term) and lower total cost (shorter term).

Total Loan Cost is the full amount returned to the lender: Total Interest Paid + Origination Fee. This is the most honest single number for evaluating the cost of a financing option, it includes every dollar paid above the original loan principal.

Effective APR is the critical metric for comparing financing options. The calculator uses a bisection search to find the precise monthly interest rate at which the present value of all monthly payments equals the net disbursement (loan amount minus origination fee), then annualizes it. The gap between Effective APR and Stated Rate shows exactly how much the origination fee costs you in percentage-point terms over the loan's life.

How to use this Business Loan calculator

Enter your Loan Amount, the total financing you need. Remember that origination fees are typically deducted from the disbursement, so if you need exactly $200,000 in hand with a 2% origination fee, you would need to borrow approximately $204,082 ($200,000 ÷ 0.98).
Set the Annual Interest Rate, use the rate quoted by the lender, not the APR. If comparing multiple offers, enter each stated rate separately to see the APR comparison.
Set the Loan Term, in years. Match the term to the asset's useful life and your cash flow capacity. SBA 7(a) working capital: up to 10 years. SBA 7(a) real estate: up to 25 years. Equipment: 3–7 years. Conventional: 1–10 years depending on purpose.
Select the Loan Type, this provides context cards rather than changing the calculation. Conventional, SBA 7(a), SBA 504, Equipment, or Line of Credit. Each shows the typical use case and program constraints to help you match the right product to your need.
Enter the Origination Fee Percentage, the fee your lender charges, expressed as a percentage of the loan amount. Check your loan estimate or term sheet. If you're unsure, 1.5% is a reasonable assumption for conventional business loans; use 2–3.75% for SBA loans.
Compare Effective APR to Stated Rate, the gap tells you the cost of the fee. If the gap is large (over 1 percentage point), consider negotiating the fee down or finding a lender with a lower fee structure. An origination fee waiver on a 3-year $200,000 loan saves roughly 1.5 percentage points of effective APR.

Show formula & methodology ↓Show less ↑

Formula & Methodology

Monthly payment (standard amortization):

P × r(1+r)ⁿ ÷ ((1+r)ⁿ − 1)

Where: P = loan principal · r = monthly rate (annual rate ÷ 12) · n = term in months

Net disbursement:

Net Disbursement = Loan Amount − Origination Fee

Where: Origination Fee = Loan Amount × (Origination Fee % ÷ 100)

Effective APR (bisection search):

Find monthly rate m such that: Monthly Payment × (1 − (1+m)^−n) ÷ m = Net Disbursement

Effective APR = m × 12 × 100

Total loan cost:

Total Loan Cost = (Monthly Payment × n) + Origination Fee

Worked example:

Loan amount: $250,000 · Rate: 8.5% · Term: 7 years (84 months) · Origination fee: 2%

Monthly rate: 8.5% ÷ 12 = 0.7083%

Monthly payment: $250,000 × 0.007083 × (1.007083)^84 ÷ ((1.007083)^84 − 1) = $3,899/month

Total payments: $3,899 × 84 = $327,516

Total interest paid: $327,516 − $250,000 = $77,516

Origination fee: $250,000 × 2% = $5,000

Total loan cost: $327,516 + $5,000 = $332,516

Net disbursement: $250,000 − $5,000 = $245,000

Effective APR (bisection): monthly rate ≈ 0.765% → APR = 9.18% (stated rate was 8.5%, fee adds 0.68 pp)

Key assumptions: The calculator models fully amortizing term loans with level monthly payments. It does not model balloon payment structures, interest-only periods, variable-rate loans, or the revolving nature of lines of credit. For SBA loans, rate caps change with the prime rate, this calculator uses the rate you input as fixed. Business loan tax deductibility of interest is not factored into the cost display, after-tax APR would be lower for profitable businesses in higher tax brackets.

Frequently Asked Questions

What is a Small Business Loan Calculator?

A Small Business Loan Calculator computes your monthly payment, total interest paid, total loan cost, and effective APR for a business financing arrangement. Unlike a basic loan payment calculator, it accounts for origination fees, which most business loans carry, to show you the difference between your stated interest rate and the true annual cost of the loan (APR). This gives you a more accurate picture of what you're actually paying to borrow money for your business.

What is the difference between interest rate and APR for business loans?

The interest rate is the periodic cost of borrowing expressed as a percentage, it determines your monthly payment and total interest dollars paid. APR (Annual Percentage Rate) includes both the interest rate and the amortized cost of fees (origination, closing, processing fees) over the loan term, giving you the true all-in cost. A loan with a 7.5% rate and a 2% origination fee on a 5-year term has an APR of approximately 8.4%, nearly a full percentage point higher. When comparing loan offers, always compare APRs, not interest rates.

What is an SBA 7(a) loan and how does it work?

An SBA 7(a) loan is the most common Small Business Administration loan program, a government-guaranteed loan made by private lenders (banks, credit unions) with the SBA backing 75–85% of the principal. The guarantee reduces lender risk and allows access to financing for businesses that might not qualify for conventional loans. Maximum loan amount is $5 million. Terms run up to 10 years for working capital and 25 years for real estate. Interest rates are typically prime rate + 2.25–4.75%, making them competitive with conventional business loans.

What is a typical origination fee for a business loan?

Business loan origination fees typically range from 0.5% to 5% of the loan amount, depending on loan type and lender. Conventional bank loans tend to charge 0.5–2%. SBA 7(a) loans have a government-mandated guarantee fee structure based on loan size: 2% for loans up to $150K, up to 3.75% for loans over $700K. Equipment loans typically charge 1–2%. Online and alternative lenders often charge 2–5%. The origination fee is deducted from the disbursement, you receive the loan amount minus the fee, but pay interest on the full principal.

How does a business line of credit differ from a business term loan?

A business term loan is a lump-sum disbursement repaid over a fixed schedule, like a mortgage for your business. A business line of credit is revolving: you borrow up to your limit, repay, and borrow again as needed, more like a business credit card. Term loans are best for specific capital needs (equipment, expansion, acquisition). Lines of credit are better for managing cash flow gaps, seasonal inventory needs, or covering payroll during slow periods. The Small Business Loan Calculator models term loan repayment, for revolving credit, your effective APR depends on how frequently you draw and repay.

Can a startup qualify for an SBA loan?

SBA loans are generally available to existing businesses with at least 2 years of operating history, as lenders want to see revenue and cash flow. True startups (less than 2 years old) have limited SBA options, the SBA Microloan program (up to $50,000, typically through nonprofit lenders) and some SBA 7(a) lenders who work with startups using robust collateral or a strong personal guarantee. Most startup financing comes from personal savings, SBA Microloans, equipment financing (asset-backed), business credit cards, or angel/venture capital depending on the industry.

How is effective APR calculated for a business loan with an origination fee?

Effective APR is calculated using the Internal Rate of Return (IRR) of the loan's cashflows. You receive the net disbursement (loan amount minus origination fee upfront), then make a series of fixed monthly payments. The monthly interest rate that makes the present value of all payments equal to the net disbursement is the loan's monthly IRR, multiply by 12 to get the APR. A $100,000 loan with a 1.5% origination fee, 8% stated rate, and 5-year term produces a net disbursement of $98,500 and an effective APR of approximately 8.7%.

What credit score do I need for a business loan?

Requirements vary significantly by loan type. SBA 7(a) loans typically require a personal credit score of 650+ (many lenders prefer 680+), 2+ years in business, and strong financial statements. Conventional bank business loans generally require 680–720+ personal credit and 3+ years of business history. Equipment loans are more lenient (600–640+) because the equipment serves as collateral. Online business lenders (Kabbage, OnDeck, Fundbox) often approve at 500–600+ but charge significantly higher rates to compensate for the risk, these rates can reach 40–60% APR and should be modeled carefully with this calculator.

Should I use a shorter or longer loan term for my business loan?

Shorter terms produce higher monthly payments but significantly lower total interest paid and effective APR. A $200,000 business loan at 8.5% costs $4,100/month over 5 years (total interest: $48,000) but only $2,240/month over 10 years (total interest: $68,800), a $20,800 difference in interest. Choose the shortest term your cash flow can support while maintaining 3–6 months of operating expenses as a reserve. Matching the loan term to the useful life of the asset being financed is also sound practice: equipment with a 7-year life warrants no more than a 7-year term.

How does a business loan affect my debt-to-income ratio?

If you're a sole proprietor or personally guarantee the business loan (which SBA requires), the monthly business loan payment may be counted in your personal debt-to-income ratio when you apply for personal credit, including a home mortgage. A $3,000/month business loan payment on a $120,000 personal income raises your DTI by 2.5 percentage points, potentially pushing you above the 43% mortgage qualification threshold. Use the [Debt-to-Income Ratio Calculator](/debt-to-income-calculator/) to model the impact of a business loan on your personal credit profile before signing.

What is an equipment loan and how does it differ from an SBA loan?

An equipment loan is a type of secured business financing where the equipment being purchased serves as collateral, if you default, the lender repossesses the equipment. This collateralization means lower rates (typically 4–10%) and easier qualification than unsecured lending. Terms match the equipment's useful life (3–7 years for most machinery). SBA 504 loans are a hybrid: a government-guaranteed structure specifically for major fixed assets (equipment over $1M, real estate), with two-part financing (bank + SBA debenture) and rates tied to 10-year Treasury notes plus a spread.

Are business loan interest payments tax deductible?

Yes, interest paid on a legitimate business loan is fully tax-deductible as a business expense under IRS rules, reducing your taxable business income dollar for dollar. This applies to SBA loans, conventional business loans, equipment loans, and business lines of credit. The principal repayment is not deductible, only the interest component. For a business in the 25% effective tax bracket paying $12,000/year in loan interest, the after-tax cost is $9,000 ($12,000 × 0.75). Factor this when comparing the after-tax cost of debt financing against alternative financing sources.

Also known as

business loan calculatorSBA loan calculatorsmall business loan calculatorcommercial loan calculatorSBA 7a calculatorequipment loan calculator