Business Loan Calculator

A term loan is a lump sum repaid in equal monthly installments, commonly over one to ten years, longer when real estate secures the note. Interest accrues on the balance you still owe, so early payments are mostly interest and later ones are mostly principal. The term you pick moves total cost more than most borrowers expect. Take $150,000 at 8.5 percent. Over five years the payment is about $3,078 and total interest comes to roughly $34,700. Stretch the same loan to ten years and the payment drops to about $1,860, but total interest climbs past $73,000. The longer term more than doubles the interest bill in exchange for breathing room in the monthly budget. Then there is the origination fee, typically 1 to 5 percent, which the lender deducts from your disbursement rather than billing separately. A 2 percent fee on that $150,000 loan means $147,000 reaches your account while you repay the full $150,000 plus interest. Size the request so the net amount still covers what you set out to fund.

Banks are the cheapest money for borrowers who fit their box: roughly two years of history, solid revenue, and personal credit near 680 or higher. The tradeoff is time. A bank term loan can take two to eight weeks from application to funding, and the documentation list is long. Credit unions price close to banks and sometimes underwrite smaller loans more flexibly; you can confirm that a credit union is federally insured through the NCUA. Online lenders exist for speed and thinner files. Approval can come the same day and funding within one to three business days, but rates of 10 to 30 percent on terms of one to five years are common. If your file is marginal for a bank and you can afford to wait, ask about a government guarantee. The SBA loan programs let a bank approve a loan it would otherwise decline, because the agency stands behind most of the balance. A sensible sequence: apply where you already bank, then collect two or three online quotes so you can see the whole spread before signing anything.

Four things decide most applications. Credit comes first, both your personal FICO and the business files at Dun & Bradstreet and Experian Business. Second is cash flow. Lenders divide annual net operating income by total annual debt payments, including the proposed loan, to get a debt service coverage ratio, and most want 1.25 or better, which means income covers the payments with a 25 percent cushion. Third is time in business: two years is the usual bank threshold, while some online lenders will look at six months. Fourth is collateral. Pledging equipment, property, or receivables lowers the lender's risk and usually your rate. Run the coverage ratio yourself before applying. Net operating income of $180,000 against $120,000 in annual debt payments, new loan included, gives 1.5, comfortable at most banks. The same income against $160,000 in payments gives 1.125, and an underwriter will push back. If your number falls under 1.25, a longer term or a smaller request may fix the application before anyone declines it.

Franchises borrow differently than independent startups because the lender can underwrite the brand's track record instead of a blank page. The Franchise Disclosure Document lays out expected startup costs in Item 7: the franchise fee, buildout, equipment, signage, and the working capital you burn before the location turns profitable. That schedule gives a lender a cost basis it can trust, and brands with years of profitable locations behind them get better terms than unproven concepts. Franchisors listed in the SBA Franchise Directory can be financed through the 7(a) program, which matters because franchise projects often run larger than an unsecured bank loan would allow. Plan on putting in 10 to 20 percent of the project yourself, and expect questions about your own experience running that kind of operation.

Rate shopping starts months before the application. Pay down revolving balances, resolve collections, and correct errors in your business credit reports. The payoff is real: two percentage points on a $200,000 seven-year loan is roughly $17,000 in interest. Collateral helps too. A secured loan often prices 1 to 3 points below an unsecured one from the same lender. Compare offers on total cost, not the headline rate. On a five-year $150,000 loan, 7 percent with a 3 percent origination fee actually costs a little more than 8 percent with no fee once everything is added up, which is why this calculator breaks the fee out as its own line. And price a shorter term against a longer one before you decide. The payment difference is easy to see, but the interest difference is usually the bigger number.