Business Loan Calculator — Free Online Analysis Tool

How to Use the Business Loan Calculator

This calculator helps business owners understand the true cost of borrowing by factoring in origination fees alongside interest charges. Use it to compare loan offers from different lenders and find the most cost-effective option.

1. Enter the loan amount. Input the total amount you need to borrow. Consider not just your immediate needs but also a buffer for unexpected costs. A common mistake is borrowing too little and needing a second, more expensive loan shortly after. However, avoid borrowing more than you can comfortably repay from business cash flow.
2. Set the interest rate. Enter the annual interest rate from your lender offer or use typical market rates for your loan type. In 2026, SBA loans run 6-9%, traditional bank loans 6-13%, online lenders 8-30%, and equipment financing 4-10%. Get quotes from multiple lenders to find the best rate for your credit profile and business situation.
3. Select the loan term. Choose the repayment period that balances monthly affordability with total cost. Shorter terms cost less overall but require higher monthly payments. A good rule is to match the loan term to the purpose: working capital (12-24 months), equipment (36-84 months), real estate (120-300 months). The calculator shows how the term affects both your monthly payment and total interest.
4. Enter the origination fee. Input the lender origination or processing fee as a percentage. This fee is either deducted from your loan proceeds (reducing the amount you receive) or added to the loan balance (increasing the amount you repay). The calculator assumes the fee is deducted from proceeds, which is the most common structure.
5. Review the complete analysis. The results show your monthly payment, net proceeds (what you actually receive), origination fee in dollars, total interest, total cost (interest plus fee), effective APR, and total repayment amount. The pie chart visualizes the split between principal, interest, and origination fee.

Compare multiple loan scenarios by changing the rate, term, and origination fee to see which combination delivers the lowest total cost while maintaining affordable monthly payments.

Business Loan Payment Formula

Business loans use the standard amortization formula to calculate fixed monthly payments. The key addition in business lending is the origination fee, which creates a difference between the stated interest rate and the effective APR.

Where:

• M = Fixed monthly payment
• P = Loan principal (amount borrowed)
• r = Monthly interest rate (Annual Rate ÷ 12 ÷ 100)
• n = Total number of monthly payments
• Effective APR = The rate that makes the present value of all payments equal the net proceeds

Worked Example

Calculate the cost of a $150,000 business loan at 7.0% APR for 60 months with a 2% origination fee:

1. Origination fee: $150,000 × 0.02 = $3,000
2. Net proceeds: $150,000 − $3,000 = $147,000
3. Monthly rate: 7.0% ÷ 12 = 0.5833%
4. Monthly payment: $150,000 × [0.005833 × (1.005833)⁶⁰] / [(1.005833)⁶⁰ − 1] = $2,970
5. Total repayment: $2,970 × 60 = $178,200
6. Total interest: $178,200 − $150,000 = $28,200
7. Total cost (interest + fee): $28,200 + $3,000 = $31,200
8. Effective APR: approximately 7.5% (the rate at which the present value of $2,970/month for 60 months equals $147,000)

The 2% origination fee increases the effective borrowing cost from 7.0% to approximately 7.5%. While this difference seems small on an annualized basis, it represents an additional $3,000 in upfront costs. For shorter loan terms, the origination fee has a larger impact on the effective APR because the fee is spread over fewer months.

Practical Business Loan Examples

These scenarios illustrate how different business types use loans and how the numbers work for various loan amounts, terms, and purposes in 2026.

Restaurant Equipment Upgrade

Marco owns a growing Italian restaurant and needs $80,000 for a commercial kitchen renovation and new equipment. He qualifies for an SBA 7(a) loan at 8.0% APR with a 1% origination fee ($800) for 84 months. His monthly payment is $1,244, net proceeds are $79,200, and total interest is $24,500. Total cost including the origination fee is $25,300. The new equipment increases his kitchen capacity by 40%, allowing him to serve 30 more covers per night at an average check of $45, adding approximately $40,500/month in revenue. Even accounting for increased food and labor costs, the additional profit easily covers the loan payment within the first few months, making this a high-return investment in his business growth.

E-Commerce Inventory Financing

Sophia runs an online store with seasonal demand peaks. She takes a $50,000 business line of credit at 9.5% to stock up on inventory before the holiday season. She draws the full $50,000 in September, paying interest-only of $396/month. Her holiday sales from October through December generate $180,000 in revenue with a 35% margin ($63,000 profit). She repays the $50,000 in January, having paid approximately $1,580 in total interest over 4 months. Using an online term loan comparison: a $50,000 12-month term loan at 12% would cost $4,442/month with $3,300 in total interest, but the line of credit saved her $1,720 in interest because she only needed the funds for 4 months. The flexibility to draw and repay quickly is the key advantage for seasonal businesses.

Professional Services Firm Expansion

Taylor operates a growing accounting firm and needs $200,000 to open a second location (lease security deposit, build-out, furniture, technology, and working capital for the first 6 months). She qualifies for a bank term loan at 7.5% with a 2.5% origination fee ($5,000) for 120 months. Her monthly payment is $2,372, net proceeds are $195,000, and total interest is $84,600. Total cost is $89,600. The new office is projected to generate $400,000 in additional annual revenue with $120,000 in net profit after all expenses (including the loan payment of $28,464/year). The return on the loan investment is approximately 34% annually ($120,000 profit divided by $89,600 total loan cost over its lifetime), making this a strong expansion decision.

Startup Working Capital Loan

Jason launched a mobile app development agency 18 months ago and needs $30,000 in working capital to bridge a cash flow gap while waiting on two large client payments totaling $85,000. Traditional banks decline him due to limited business history, so he obtains an online business loan at 15% APR with a 3% origination fee ($900) for 24 months. His monthly payment is $1,455, net proceeds are $29,100, and total interest is $4,920. Total cost is $5,820. While expensive compared to SBA rates, the loan allows Jason to keep his team employed, deliver the projects, and collect the $85,000 in receivables. Once collected, he can pay off the loan early (checking for prepayment penalties first) and save on remaining interest. The alternative of losing the contracts and his team would have been far more costly.

Business Loan Tips and Complete Guide

Getting the right business loan at the best terms requires preparation, comparison shopping, and strategic thinking. These tips help you secure financing that supports growth without straining cash flow.

Prepare Your Financial Documentation

Lenders evaluate business loans based on your financial health, so having organized, accurate documentation speeds up the process and improves your chances. Prepare at minimum: 2-3 years of business and personal tax returns, year-to-date profit and loss statement, balance sheet, bank statements (last 6-12 months), accounts receivable and payable aging reports, and a business plan with financial projections. For SBA loans, also prepare a personal financial statement (SBA Form 413) and a detailed explanation of how the funds will be used. Businesses with clean, well-organized financials that demonstrate consistent revenue growth and healthy margins get approved faster and at better rates.

Compare the True Cost Across Lenders

Business loan pricing is not always transparent. Beyond the stated interest rate, compare origination fees (0-6%), closing costs, prepayment penalties (some charge 2-5% of the remaining balance if you pay early), annual fees, and late payment fees. Two loans with the same interest rate can have very different total costs. A $150,000 loan at 7% with 0% origination fee costs $28,200 in total interest. The same loan at 6.5% with a 3% origination fee costs $26,300 in interest plus $4,500 in fees, totaling $30,800, making the lower-rate loan actually $2,600 more expensive. The effective APR calculation in our calculator helps you make true apples-to-apples comparisons between offers with different fee structures.

Calculate Your Debt Service Coverage Ratio

Before borrowing, calculate whether your business can comfortably support the loan payment. Divide your annual net operating income by the annual loan payment. Lenders typically require a DSCR of 1.25 or higher (meaning your income exceeds payments by 25%). If your business generates $200,000/year in net operating income and the loan payment is $36,000/year, your DSCR is 5.56, which is excellent. If your net income is $40,000/year, the DSCR is only 1.11, which is tight and may not be approved. A DSCR below 1.0 means the business cannot cover the loan from operating income alone, requiring other sources of repayment.

Understand Prepayment Terms Before Signing

Many business loans include prepayment penalties, especially SBA loans and term loans with favorable rates. A typical prepayment penalty ranges from 1-5% of the remaining balance, declining over the first 3-5 years. On a $150,000 loan with a 3% prepayment penalty, paying off the loan in year one costs an extra $4,500. Some lenders charge the penalty only if you refinance with another lender but not if you pay off from business revenue. Others have no prepayment penalty at all. If you expect to pay off the loan early (from increased revenue, selling the business, or refinancing at a lower rate), negotiate for no prepayment penalty or minimal early payoff fees before signing.

Common Mistakes to Avoid

• Borrowing without a clear ROI plan. Every dollar borrowed costs more than a dollar to repay. Before taking a loan, calculate the expected return on the investment. Will the new equipment increase revenue by more than the loan costs? Will the expansion generate enough profit to cover payments? If you cannot articulate how the loan will generate returns exceeding its cost, reconsider borrowing.
• Taking the first offer without comparing. Business loan rates and terms vary dramatically between lenders. Check banks, credit unions, SBA-preferred lenders, and online lenders. Even a 1% rate difference on a $150,000 five-year loan saves approximately $4,500 in interest. Spend a week gathering quotes before committing.
• Choosing the wrong loan type for the purpose. Do not use a short-term merchant cash advance (effective APR 40-100%+) for a long-term capital investment. Do not take a 20-year loan for inventory that turns over quarterly. Match the loan type and term to the purpose and expected payback period of the investment.
• Ignoring the impact on personal credit. Most small business loans require a personal guarantee. Defaults can damage your personal credit, lead to personal asset seizure, and affect your ability to get a mortgage or car loan. Treat business loan obligations with the same seriousness as personal debts.
• Not planning for cash flow variability. Businesses have good months and bad months. Ensure you can make loan payments even during your slowest months. Build a cash reserve equal to at least 3 months of loan payments before borrowing. If your business is seasonal, consider a line of credit (draw when needed, repay when revenue comes in) rather than a fixed term loan with constant monthly payments.