Business Loan Calculator
What will my business loan cost and can my business afford it? Calculate monthly payments, check your DSCR, and compare loan offers.
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How to Use This Calculator
Tab "Loan Payment"
Enter your loan amount, annual interest rate, term in years, and origination fee percentage. The calculator shows your monthly payment, total interest paid, upfront fees, total cost, and effective annual rate — the true cost including fees.
Tab "DSCR Check"
Enter your monthly revenue, monthly operating expenses, and the proposed loan payment (from the Loan Payment tab). The calculator computes your Debt Service Coverage Ratio and tells you whether you pass the typical bank minimum of 1.25.
Tab "Compare Terms"
Enter the same loan amount and fill in rate, term, and fees for up to three different loan offers. The side-by-side table ranks them by total cost (interest plus fees), revealing which deal is truly cheapest over the full term.
The Formulas
PMT = P × r_m × (1 + r_m)^n / ((1 + r_m)^n − 1)
where P = loan amount, r_m = annual rate / 12, n = total months
Total interest:
Total interest = (PMT × n) − P
Total cost including fees:
Total cost = Total interest + (P × fee%)
Effective annual rate:
Solve for r such that: (P − fees) = PMT × (1 − (1 + r_m)^−n) / r_m
Effective annual rate = r_m × 12
Debt Service Coverage Ratio (DSCR):
DSCR = Net Operating Income / Total Debt Service
NOI = Monthly Revenue − Monthly Operating Expenses
Banks typically require DSCR ≥ 1.25
All calculations use standard financial mathematics. No country-specific tax rates are applied. Results are pre-tax estimates.
Worked Examples
Example 1 — Loan Payment: $100K at 8% for 7 years, 2% origination fee
A small business takes a $100,000 loan at 8% annual rate, repaid over 84 months, with a 2% upfront origination fee.
The monthly payment is $1,556. Over 84 months you pay $30,711 in interest plus $2,000 in fees — a total cost of $32,711. The 2% fee raises the effective rate from 8% to about 8.6%.
Example 2 — DSCR Check: Revenue $25K/mo, Expenses $18K/mo, Loan $1,556/mo
The same business has monthly revenue of $25,000 and operating expenses (excluding debt) of $18,000.
DSCR = $7,000 / $1,556 = 4.50. This is well above the 1.25 minimum — the business generates $4.50 of net income for every $1 of debt service. Lenders will view this as very low risk.
Example 3 — Compare: Bank A (7.5%, 5yr, 1% fee) vs Bank B (8.5%, 7yr, 0% fee) vs SBA (6%, 10yr, 2% fee)
Three loan offers on $100,000. Which is cheapest over the full term?
| Option | Monthly | Total interest | Fees | Total cost |
|---|---|---|---|---|
| SBA 6% / 10yr ★ | $1,110 | $33,225 | $2,000 | $35,225 |
| Bank A 7.5% / 5yr | $2,003 | $20,152 | $1,000 | $21,152 |
| Bank B 8.5% / 7yr | $1,588 | $33,382 | $0 | $33,382 |
Bank A has the lowest total cost at $21,152 — despite the higher monthly payment, the shorter term means far less interest accumulates. The SBA loan has the lowest monthly payment but costs $35,225 over 10 years. Always consider total cost alongside monthly affordability.
Understanding Business Loans: Key Concepts
Monthly Payment and Amortisation
Most business loans are fully amortising — each monthly payment covers both interest and a portion of principal, so the balance reaches zero at the end of the term. Early payments are mostly interest; later payments are mostly principal. This is why making extra payments early saves disproportionately more interest.
Effective Rate vs Stated Rate
The stated rate is the nominal annual interest rate. The effective rate (sometimes called APR — Annual Percentage Rate) is higher whenever upfront fees exist, because those fees reduce the actual money you receive while your payments remain based on the full loan amount. A 2% origination fee on a 7-year loan typically adds about 0.5-0.7 percentage points to the effective rate. Always compare effective rates when evaluating offers.
Debt Service Coverage Ratio (DSCR)
DSCR is the single most important metric lenders use to assess business loan affordability. It measures how many times your Net Operating Income (revenue minus operating expenses, before debt payments) covers your total debt payments.
| DSCR | Interpretation | Lender view |
|---|---|---|
| Below 1.0 | Income cannot cover debt | Likely declined |
| 1.0 – 1.15 | Tight — no buffer | High risk, usually declined |
| 1.15 – 1.25 | Marginal | SBA minimum; many banks decline |
| 1.25 – 1.5 | Acceptable | Standard bank minimum |
| 1.5 – 2.0 | Good | Comfortable; may get better rates |
| Above 2.0 | Excellent | Strong position; best rates available |
If your DSCR is below 1.25, consider: reducing the loan amount, extending the term (lower monthly payment), improving revenue before applying, or providing additional collateral.
Term Length Trade-offs
A shorter term means higher monthly payments but far less total interest — better for businesses with strong cash flow. A longer term lowers monthly payments (improving DSCR) but dramatically increases total interest paid. For example, $100,000 at 8%: a 5-year term costs ~$21,700 in interest; a 10-year term costs ~$45,600 — more than double. Choose the shortest term your cash flow can comfortably support.
Types of Business Loans
Term loans (covered by this calculator): Fixed amount, fixed rate, fixed repayment schedule. Typical for equipment, expansion, or working capital. Lines of credit: Revolving facility — draw as needed, pay interest only on what you use. Not modelled here. SBA loans: Government-guaranteed loans (US-specific) with lower rates and longer terms but more paperwork and fees. Revenue-based financing: Repayment as a percentage of revenue — not a fixed payment. This calculator covers fixed-payment term loans only.